Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER MANCHESTER BILL [Lords] (By Order)

Order for consideration read.

To be considered upon Thursday 2 April at Seven o'clock.

HUMBERSIDE BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 2 April.

BRITISH TRANSPORT DOCKS BILL (By Order)

Read a Second time and committed.

COUNTY OF KENT BILL [Lords] (By Order)

EAST SUSSEX BILL [Lords] (By Order)

Orders for Second Reading read.

To be read a Second time upon Thursday 2 April.

Oral Answers to Questions — NATIONAL FINANCE

Benefits in Kind

Mr. Alton: asked the Chancellor of the Exchequer if he will extend the taxation of recipient declared benefits in kind to those earning less than £8,500 per annum.

The Financial Secretary to the Treasury (Mr. Nigel Lawson): No, Sir.

Mr. Alton: Is the Minister aware that his decision to tax the provision of season tickets hits not only low wage earners but those who use public transport, and is particularly unfair? Is it not time to adopt a more consistent attitude to benefits in kind?

Mr. Lawson: This is a move towards consistency. A small number of people have the benefits of credit cards and season tickets, which are so close to cash that it is anomalous for them not to be chargeable in all cases, regardless of income. They are now to be so charged.

Mr. McCrindle: I realise how attractive it is to tax "perks", not least company cars, but will my right hon. Friend consider doing that only when we can make further progress in reducing the standard rate? Otherwise, some of my middle-class constituents will feel aggrieved.

Mr. Lawson: I know my hon. Friend well, and I know the high esteem in which he is held by his constituents. I am sure that he will be able to persuade them not to feel

aggrieved. He will also be aware that, contrary to many of the objective arguments that could be made and that were set out in the Inland Revenue's consultative document some time ago, the increase of 20 per cent. in the s cale charges which my right hon. and learned Friend introduced in the Budget—the same as the increase that was introduced in last year's Budget—is, in the circumstances, relatively modest and gradualist.

Budget Measures (Unemployment)

Mr. John Evans: asked the Chancellor of the Exchequer what assessment he has made of the effects on unemployment of the Budget measures.

The Chief Secretary to the Treasury (Mr. Leon Brittan): The Budget is an essential part of the strategy to combat inflation. This is vital to creating the conditions required for sustainable growth of output and employment.

Mr. Evans: Is the right hon. and learned Gentleman aware of the rumours that unemployment will reach 3,700,000 by 1983? Will he now state categorically that the Budget will add not even 500,000, never mind 1,200,000, to the present level of unemployment?

Mr. Brittan: Such rumours have nothing to do with the Treasury.

Mr. Waldegrave: Will my right hon. and learned Friend give an estimate of by how much he thinks final demand will increase during the next 12 months?

Mr. Brittan: I refer my hon. Friend to the estimate given in the Financial Statement and Budget Report. Paragraph 16 gives the figures for gross domestic product and manufacturing output, which I think is the information that he seeks.

Mr. Shore: Surely the Chief Secretary knows the forward estimates for unemployment as a result of the Budget? The figures must be part of the general information available to the Treasury. What does he expect the increase in unemployent to be over the next year? Will he comment upon the statement reported in the press today that Treasury Ministers believe that Britain has a "natural rate" of unemployment of 5 per cent?

Mr. Brittan: The second issue is referred to in a paper to the Treasury and Civil Service Select Committee which explains the matter fully. It is not the practice to publish unemployment predictions. If the right hon. Gentleman wants to know why, I refer him to an excellent explanation in a letter written by the right hon. Member for Leeds, East (Mr. Healey) to the hon. Member for Wolverhampton, North-East (Mrs. Short) on 11 July 1978.

Mr. Dykes: Does the Chief Secretary agree as a general principle that the rise in unemployment, taking other factors into account, increases rather than decreases the need to stimulate the economy?

Mr. Brittan: That proposition is expressed in too general a form for a general acceptance or rejection of it.

Mr. Carter-Jones: Since the Chancellor of the Exchequer took great credit for reducing the MLR, will the Chief Secretary say what the MLR was in 1979? Does he agree that unemployment has doubled since his party came to power?

Mr. Brittan: Such questions range rather beyond the question on the Order Paper. There is reason to be pleased that the financial situation arising from the Budget measures made it possible to reduce MLR by 2 per cent.

Budget Measures

Mr. Winnick: asked the Chancellor of the Exchequer what representations he has received about his Budget.

Mr. Canavan: asked the Chancellor of the Exchequer what reaction he has received to his recent Budget Statement.

The Chancellor of the Exchequer (Sir Geoffrey Howe): I have received numerous and varied representations on many aspects of the Budget.

Mr. Winnick: Is the Chancellor aware of the almost unanimous opposition and contempt throughout the country for his Budget? Is he aware that no KGB mole who became Chancellor of the Exchequer could have inflicted greater harm on British industry and its employees than the right hon. and learned Gentleman did in his Budget?

Sir Geoffrey Howe: I suppose that I must admire the hon. Gentleman's ingenuity.—[Hon. Members "Why?"] There is not much else to admire. The hon. Gentleman certainly cannot claim to speak on behalf of the British people.

Mr. Canavan: Does the Chancellor realise that his Budget has no friends outside the Cabinet and few friends even inside the Cabinet? Since the 20p increase in the price of a gallon of petrol will increase inflation and the cuts in public expenditure will increase unemployment, is not it about time, even at this late date, that the Chancellor considered ditching his disastrous policies which caused a record 1 million increase in the number of unemployed in the last 12 months?

Sir Geoffrey Howe: The hon. Gentleman is wholly mistaken if he believes that the increase in unemployment in the last 12 months is attributable to the Government's policies. He might, for example, note that during the same period unemployment in the OECD countries rose by 3 million. It is a general feature. It does no good to proceed on the basis of such assertions. Many people have written to me and my right hon. Friends congratulating the Government on the Budget.

Mr. Canavan: Name one.

Sir Geoffrey Howe: They recognise that our policies are likely to bring inflation and unemployment under control.

Mr. Eggar: Is my right hon. and learned Friend aware that independent studies show that there is little difference in the average number of gallons of petrol used by motorists in rural and urban areas? Does not that show that the Budget in no way discriminates against rural motorists?

Sir Geoffrey Howe: My hon. Friend is right to draw attention to some studies which show precisely that. One must take account of the slightly higher mileages driven in rural areas and the slightly higher mileage per gallon. The tax measures are part of the fair distribution of the burden of indirect taxation in the Budget.

Mr. Richard Wainwright: Is the Chancellor aware of the disappointment caused by yet another Budget which

lumps together, in the borrowing requirement, borrowing to finance wealth-creating projects which are urgently needed and borrowing simply to finance consumption?

Sir Geoffrey Howe: Only if the hon. Gentleman had not studied the White Paper carefully—I know that he has—could he come to that conclusion. The White Paper sets out clearly, for example, the nationalised industries' investment programmes. They provide for higher investment in the years immediately ahead than in the years just past.

Mr. Adley: If my right hon. and learned Friend is prepared to examine ways of raising taxation revenue alternative to the petrol tax, will be he take note of a written answer to me yesterday which states that the Government could raise £150 million in taxation by putting VAT on the standard rate of overseas package tour holidays? That would have the simultaneous advantage of helping a home industry. Will he give the suggestion serious consideration?

Sir Geoffrey Howe: There are a number of other aspects to that proposal. Any suggestion by my hon. Friend deserves consideration. I make it clear, however, that we stand by the increases on petrol and derv as an essential part of our strategy for reducing the public sector borrowing requirement.

Mr. Cook: Will the Chancellor of the Exchequer confirm Monday's written answer that, following the Budget, it will take a mere 33p a week in graduated pension to carry a woman pensioner under the age of 65 over the tolerance limits? Will he confirm that he has thereby brought 500,000 pensioners into the tax net for the first time in history? Did he know that when he laid the Budget before the House? If he did, why did he not tell the House? If he did not know, what does he propose to do to relieve low income pension households from the tax burden which he has thrust upon them?

Sir Geoffrey Howe: No woman of the age and type that the hon. Gentleman describes and who is receiving the basic pension will be drawn into the tax net because of the long-standing pattern of tolerance applied by the Inland Revenue. The numbers of people that the hon. Gentleman suggests might be drawn into the tax net who are in receipt of additional pensions or other income are nothing like as large as he suggests.

Taxation

Mr. Sheerman: asked the Chancellor of the Exchequer what tax an employed married man, with two children, earning £5,000 per annum will pay after the implementation of his Budget proposals; and how this compares with the position in April 1979.

Mr. Brittan: He will pay £856 income tax, which is £61 per year less than in 1979–80.

Mr. Sheerman: Is the Minister aware that the heavy burden of indirect taxation is causing the average working man to question severely whether it is worth being employed, even if he can find a job? Is the Minister aware that the average worker in my constituency believes that the Government's policy is one of equality of misery—misery because he cannot get a job and when he does have a job he is so highly taxed that he cannot spend his money pleasurably?

Mr. Brittan: The hon. Gentleman is making assumptions which have no foundation. I accept that increasing taxation will put burdens on people. My right hon. and learned Friend the Chancellor explained exactly why that was necessary in the context of deciding as a nation to spend money to relieve the pressures of the recession on people such as the young unemployed—for example, by providing the youth opportunities programme. That and the need to finance such schemes is not as ill-understood as the hon. Gentleman pretends.

Mr. Bill Walker: Does my right hon. and learned Friend accept that many people earning under £5,000 live in the Highlands of Scotland and have no option about public transport? Is he aware that, unlike urban dwellers, they are required to use private cars because they are the only means of moving about in the Highlands?

Mr. Brittan: That is so, as it is in parts of rural Yorkshire. For people who have to rely on motor cars, of course, I accept that the increase in petrol tax is an extra burden. The question is not whether it is an extra burden but whether, in the context of what is necessary for the economy as a whole, it is a reasonable burden to ask people to bear. I suggest that it is.

Tax and Price Index

Mr. William Hamilton: asked the Chancellor of the Exchequer if he will make a statement on the future of the tax and price index.

Mr. Brittan: The tax and price index has been published monthly by the CSO since August 1979 and there are no plans to change this procedure.

Mr. Hamilton: Will the Minister now come clean with the House and tell us the exact effect of the Budget proposals on the index? Since the Government took office, has there not been a massive increase in the taxation burden placed on low income families? Does he accept that this index is a more accurate reflection of the reduction in their standard of living than the retail price index? Does he agree with his right hon. Friend the Financial Secretary that if trade unions are to bargain on the basis of any index it would be more accurate for them and more forthright for the Government to accept that they should bargain on this index rather than the retail price index?

Mr. Brittan: The hon. Gentleman talks about coming clean. Perhaps he will come clean about his failure to read the written answers which give the answer to his supplementary question. Neither the TPI nor the RPI is meant to be a yardstick for pay bargaining. In pay bargaining, it is necessary to consider what can be afforded by the concern with which the bargaining is taking place. That is the answer to the hon. Gentleman's supplementary question.

Mr. Straw: On 17 August 1979 the Financial Secretary said that neither the TPI nor the RPI should be used for wage bargaining. He said:
if one wants a general guide to … the total costs facing taxpayers, look at the TPI, not the RPI. It is a much truer guide.
If that is so, will the right hon. Gentleman explain why the Chancellor failed to mention at any stage in his Budget Statement the effect on the TPI of the substantial changes in direct and indirect taxation?

Mr. Brittan: The hon. Gentleman springs to the defence of the TPI now. He might care to explain why, when the TPI was introduced on 17 August 1979, the response of the trade union movement was to denounce it massively as a way to con people. He cannot have it both ways.

Money Supply

Mr. Nicholas Winterton: asked the Chancellor of the Exchequer if he has any plans to move the United Kingdom on to a monetary base system of controlling the money supply.

Mr. Lawson: The changes announced by my right hon. and learned Friend in his Budget statement are consistent with a gradual move towards monetary base control. Further decisions will be taken in the light of experience.

Mr. Winterton: I am grateful for my right hon. Friend's detailed reply. If the Government are seeking to move Britain to a sound monetary base, why has private industry had to shoulder the major burden of the impact of Government policies to date to subsidise our inefficient industries, especially in the public sector, which are not founded upon a sound monetary base?

Mr. Lawson: I concede that there is much force in what my hon. Friend says. He is clearly drawing the attention of the House, as is proper, to the massive pay increases in the public services as a result of the post-dated cheques signed by the Opposition when they were in Government, which we were obliged to honour. That meant a substantially increased burden in public expenditure. The Clegg settlements involved about £2·5 billion and there were other similar settlements. Inevitably that burden has been borne by the private sector. Fortunately that phase is over. The Clegg commission has been abolished.

Mr. Jay: Does the Financial Secretary expect his monetary policies to be as successful in the future as they have been in the past two years?

Mr. Lawson: The monetary policies over the past two years have been successful in reducing the rate of inflation. I expect that success to continue.

Mr. Whitney: Does my right hon. Friend agree that the skill of the financial institutions in creating credit has shown over the past two years that the method of managing monetary interest rates is ineffective, which therefore strengthens the case for considering urgently a move to a system of monetary base control?

Mr. Lawson: I can assure my hon. Friend that we are considering this, as I said in my answer to the main question. It is an illusion to suppose that interest rates would cease to be a major instrument in the fashioning of monetary control if we were to move to monetary base control.

Mr. Robert Sheldon: Is not it clear that the Government have failed to keep their monetary target and that they are now relying more on PSBR objectives? As the right hon. Gentleman forecast that the PSBR would be £8½ billion and it turned out to be £13½ billion, why does he think that he will be more successful by trading in the money supply totem pole for the PSBR one?

Mr. Lawson: The right hon. Gentleman has never understood that it is not a matter of totem poles in either


instance. Monetary control was accepted by the right hon. Member for Leeds, East (Mr. Healey), under whom the right hon. Gentleman served, as being of the first importance, as it is by every responsible finance Minister. The public sector borrowing requirement is not a totem pole. It measures precisely what the Government have to borrow. The Treasury team of which the right hon. Gentleman was a member was not particularly accurate in its forecasts of the PSBR on a number of occasions. That does not mean that it is a matter of no importance, as the right hon. Member for Stepney and Poplar (Mr. Shore) suggested a short while ago.

Direct and Indirect Taxation

Mr. Chapman: asked the Chancellor of the Exchequer what is his estimate of the revenue which will come from direct and indirect taxation, respectively, in the year 1981–82.

Mr. Brittan: I estimate that about £46 billion will come from direct taxation and about £54 billion from indirect taxation.

Mr. Chapman: Have those proportions changed over the past two years, and if so, in what way? I accept that the level of taxation must be a matter of judgment for my right hon. and learned Friend the Chancellor of the Exchequer—perhaps it would be prudent if I added "and the Cabinet"—shortly before future Budgets, but is it the policy of Her Majesty's Government that the proportions should change in future?

Mr. Brittan: In spite of the increase in taxes such as petroleum revenue tax and North Sea corporation tax, which are direct taxes, the proportion of direct taxation in the total is 1·6 percentage points lower than in 1978–79. I shall be happy to supply the figures for each of the years for which my hon. Friend would like to have them. That reflects the Government's broad policy.

Mr. Ashley: Will the Minister pursue the fiddlers of the black economy with the same energy, enthusiasm and resources that the Department of Health uses to pursue scroungers in the Welfare State?

Mr. Brittan: Fiddlers should be pursued wherever they come from and in whatever aspect they show themselves.

Mr. Wigley: Does the right hon. and learned Gentleman accept that £3·1 billion of the £3·6 billion increase in taxation stems from indirect taxation, which will hit those on lower incomes much harder than those on higher incomes? Does he accept that they will be hit particularly hard as many of them will be drawn into the tax net for the first time? Does he agree that the Budget hits the lowest paid particularly hard?

Mr. Brittan: I do not think that I can accept the figures in that form or the conclusions drawn from them. The hon. Gentleman will know that an estimate of the impact of indirect taxes is being made by the Treasury for the Select Committee on the Treasury and Civil Service. It would be unwise to jump to the conclusions that the hon. Gentleman has arrived at before that estimate is available.

Value Added Tax

Mr. Eastham: asked the Chancellor of the Exchequer what is the average cost of value added tax on the average funeral bill.

Mr. Lawson: I regret that precise information is not available, but the hon. Gentleman will I am sure be aware that undertakers' accounts and associated fees are exempt from value added tax.

Mr. Eastham: I thank the Minister for his reply. Does he realise that when the Conservative Government doubled the rate of VAT they added a considerable burden to those who have to meet funeral expenses? The death grant is only £30. When will the Minister review the grant and introduce the realistic sum of £167?

Mr. Lawson: The hon. Gentleman will be aware that the death grant is a matter for my right hon. Friend the Secretary of State for Social Services.

Mr. James A. Dunn: Is the right hon. Gentleman aware that the supplementary question of my hon. Friend the Member for Manchester, Blackley (Mr. Eastham) related to value added tax? What portion of VAT could be lifted from the shoulders of those in the lower income groups, including pensioners?

Mr. Lawson: I do not understand how the hon. Gentleman's supplementary question arises directly from the main question. As I said to the hon. Member for Manchester, Blackley (Mr. Eastham), there is already considerable relief in respect of undertakers' accounts and associated fees.

Interest Rates

Mr. Newens: asked the Chancellor of the Exchequer if he will make a statement on the present level of interest rates.

Sir Geoffrey Howe: MLR has been reduced by 5 per cent. since last summer. I have nothing further to add to my Budget Statement.

Mr. Newens: Does the Chancellor of the Exchequer realise that, despite those reductions, the present levels of interest rates still constitute a major deterrent to investment and one of the causes of overvaluation of sterling, which is a serious, formidable obstacle to all exporters? Does he not realise that many experts consider that interest rates could have come down by another 2 per cent., and that until steps are taken to bring that about no recovery will be possible? When will he take action?

Sir Geoffrey Howe: The hon. Member should acknowledge the significance of the substantial reduction that has already been achieved. He should beware of believing that there is a reliable and certain relationship between interest and exchange rates. Interest rates in this country have come down by five points in the last nine months. They are now below the average for the OECD, and below the figures for the United States and Germany.

Mr. Latham: The 2 per cent. reduction in the Budget was welcome, but will my right hon. and learned Friend confirm that he now links minimum lending rate with all prevailing economic factors, and not solely with the money supply? If that is so, further reductions should follow the deflationary Budget.

Sir Geoffrey Howe: In my Budget speech I described at length the factors that should be taken into account in relation to interest rates. The Budget was designed to create a setting in which the interest rate reduction announced on that date could take place. I hope that all


hon. Members will support the policy of ensuring that borrowing is kept to a reasonable size to ensure that further progress is made in that direction.

Mr. Woolmer: Despite the reduction in interest rates, is it not true that investment in manufacturing industry fell by 5 per cent. last year and that the latest forecasts are that it will fall by up to a further 15 per cent. this year? As unemployment has risen by 1 million in 12 months, and as manufacturing production has fallen by 15 per cent., is it not time that, instead of claiming credit for bringing prices down, the right hon. and learned Gentleman accepted the blame for the disastrous effect on industry of his policies?

Sir Geoffrey Howe: I shall do no such thing. The hon. Gentleman knows that unless we achieve and sustain progress against inflation there will be no chance of achieving progress against unemployment. That was the clear lesson from the period of office of the Labour Government. The Budget is designed to sustain progress in that direction and to create the conditions in which investment and employment begin to grow.

Mr.Cormack: Why has my right hon. and learned Friend missed the significance of the question asked by the hon. Member for Harlow (Mr. Newens)? Why does he not congratulate him on his conversion to capitalism?

Mr. Shore: The right hon. and learned Gentleman will have seen the latest company reports from Lucas, showing that it has lost about £23 million in the second half of this year. That follows a long tale of collapse, or near collapse, of many of the great British exporting firms. Does he agree that interest rates, and particularly the relationship between interest rates and the exchange rate, are crucial, as my hon. Friend the Member for Harlow (Mr. Newens) asserted? When will he take action to bring down the appallingly over-high exchange rate of the pound?

Sir Geoffrey Howe: The experience of successive Governments is that it is unwise to conclude that there is any direct or simple link between interest and exchange rates. The important thing is that there is a good case, in its own right, for securing reductions in interest rates that are compatible with responsible monetary policies. The right hon. Gentleman should not fall into the common habit of assuming that all the difficulties facing companies are unique to this country or are consequences of the Government's policy. The right hon. Gentleman knows that companies in the motor industry throughout the world are making substantial losses because of what is happening to that industry throughout the world.

Petrol and Dery

Sir David Price: asked the Chancellor of the Exchequer what estimate he has made of the effect on industrial costs of increasing duties on petrol and derv by the equivalent, including value added tax, of 20p a gallon.

Mr. Lawson: The increased duties will probably add about 0.2 per cent. to business costs. This includes the increased cost of running company cars, whether on business or private use.

Sir David Price: In coming to that figure, has my right hon. Friend done any microeconomic studies—as opposed to macroeconomic studies—of individual companies? Is he satisfied that there is no knock-on effect of increased duties through the economy to the consumer?

Mr. Lawson: I cannot say that studies have been made of the effect on every company. It is our opinion that, in both the medium and long term, other factors will determine the rate of inflation, the rate of price increases and the rate of increases in industrial costs. It is only the immediate impact effect of the duty changes that comes out at 0·2 per cent.

Mr. Nicholas Winterton: Does my right hon. Friend accept that many companies involved in freight, transport and haulage are deeply concerned about the dramatic rise in the price of derv? One large national company believes that it will add about £½ million to its fuel bill each year. A haulier in Lincolnshire believes that it will add £70,000 to his bill, and a firm in my constituency will have to lay off drivers for the first time in 25 years because, due to the recession, its customers are not able to meet the increased cost, which it must pass on to the consumer.

Mr. Lawson: The increases in petrol and derv duties and in the vehicle excise duty represent an increased burden. That burden is felt particularly by the road haulage industry. To some extent, it will pass on that burden throughout the rest of industry. Therefore, the burden is not just on the road haulage industry. My hon. Friend must bear in mind—as I am sure he does—that that was an integral part of the Budget judgment. It was an integral and necessary means of achieving the borrowing requirement that my right hon. and learned Friend considered to be appropriate for the coming year and a borrowing requirement that enabled him to reduce interest rates, which was of great value to the whole of business, industry and commerce.

Inflation

Mr. Knox: asked the Chancellor of the Exchequer what has been the rate of inflation in the most recent 12-month period for which figures are available; and what was the comparable figure for the 12-month period up to May 1980.

Mr. Brittan: The retail prices index increased by 12·5 per cent. in the 12 months to February 1981, and by 21·9 per cent. in the 12 months to May 1980.

Mr. Knox: Does my right hon. and learned Friend agree that that considerable reduction in the rate of inflation, which in itself is welcome, is the consequence of adopting policies of deflation and has nothing to do with monetarism?

Mr. Brittan: No.

Mr. Hooley: As the Government claim that inflation is a key factor in unemployment and that the rate of inflation will come down drastically in the next couple of years, why does the Chancellor of the Exchequer's White Paper forecast unemployment at 2·7 million in 1982–83 and at 2·7 million in 1983–84?

Mr. Brittan: Those figures are not forecasts, but assumptions, as the hon. Gentleman knows, from which certain other consequences are drawn. The hon. Gentleman is ignoring the past. We are talking in terms of the impact of inflation on unemployment. We are saying that, in the longer term, failure to tackle the problem of inflation is likely to increase rather than to reduce the level of unemployment. All the evidence and history of the past few years supports that. The historical


factors that we have inherited, and the world recession factors, will not prevent unemployment from reaching higher levels in the short term.

Mr. Bruce-Gardyne: To put the figures in clearer perspective, will my right hon. and learned Friend give the House the figures for the last six months, as those are probably more revealing? Does he agree that, as a measure of the Government's progress, those figures show us to be among the lower ranks in inflation throughout the European Community?

Mr. Brittan: My hon. Friend is right. The underlying six-monthly rate of inflation, on an annual basis, is around 10 to 11 per cent. That is the most reliable information.

Mr. Straw: When will the Chief Secretary and his colleagues cease to make the fraudulent claim that the country's difficulties are connected with the world recession? Has he not read the Common Market Commission's statement, which showed that unemployment in this country rose by 66 per cent. last year, which was three times the rate of the EEC average, and that deflation in this country was twice as bad as in any other European country? As we are referring to the past, will the Chief Secretary confirm that the rate of inflation that he inherited in May 1979 was just over 10 per cent., which was well below the current level?

Mr. Brittan: The underlying six-monthly rate in May 1979 was 12·2 per cent., and rising. It has never been suggested that the world recession operates in a uniform way or that it is the only factor influencing unemployment in this country, but it is absurd to suggest that our unemployment has nothing to do with the world recession. If our unemployment is higher than elsewhere, it is caused largely by the fact that in the past we have given ourselves pay increases that we have not earned, and as a result have priced ourselves out of jobs.

Budget Measures

Mr. Dykes: asked the Chancellor of the Exchequer if he is satisfied with the effects of his Budget announced on 10 March.

Sir Geoffrey Howe: It will be some time before it will be possible to give a considered answer to my hon. Friend's question.

Mr. Dykes: But is there actually any demand pull inflation in the economy at present, and, if so, where?

Sir Geoffrey Howe: Inflation in the economy is due to a range of factors, including past higher money supply growth rates. It is being sustained by the substantial pay increases throughout the economy, following the collapse of the previous Government's pay policy.

Mr. Flannery: Does the right hon. and learned Gentleman accept that unemployment will increase vastly as a result of his Budget? May we assume that he is attempting to balance the books? Does he think that he will be balancing the books if, ultimately, we produce nothing, sell nothing and everybody is out of work?

Sir Geoffrey Howe: That is a curiously unperceptive comment for the hon. Gentleman. It is not true in any respect. From his experience he should know that we shall not begin to achieve growth in employment and in the economy until we have conquered inflation. The prospects

are that inflation will continue to come down, which will in due course enable interest rates to come down and create the conditions for exactly the opposite of what the hon. Gentleman fears will take place.

Mr. Marlow: Does my right hon. and learned Friend accept that one indicator of the effects of the Budget, and particularly of industrial confidence, is the Financial Times all-share index? What has happened to that index since the Budget?

Sir Geoffrey Howe: It is one of many indicators of confidence in the consequences of the Budget. Other indicators point in the same direction. One of the most notable, which was commented on earlier this week, is the fact that private housing starts have risen from 6,600 in December to 10,300 in January. The president of the House Builders Federation observed that that offered an optimistic prospect for the year ahead.

Dr. Bray: Does not the right hon. and learned Gentleman's claim that the Budget is not contractionary imply his expectation of a substantial reduction in the exchange rate soon? So what does he intend to do about it?

Sir Geoffrey Howe: It implies no such thing.

Income Tax

Mr. Wigley: asked the Chancellor of the Exchequer if he will estimate the number of people who will be drawn into the income tax net during 1981–82, who were below the threshold for income tax during the current financial year, as a result of his proposal to suspend the automatic increase in personal tax allowances.

Mr. Brittan: It is estimated that there will be about 500,000 more taxpayers in 1981–82 than there were in 1980–81, and that there will be 1¼ million more taxpayers in 1981–82 than there would have been had allowances been fully indexed.

Mr. Wigley: Is it not grossly unfair that those who will have to bear the brunt of paying the extra direct taxation as a result of the Budget will be those with the lowest earnings? Does the right hon. and learned Gentleman accept that, taking a combination of all the factors in the Budget, the marginal tax rate for some could be as high as 104 per cent.? What about incentives, which are supposed to be behind the Government's policies?

Mr. Brittan: I do not accept the hon. Gentleman's figure. Had allowances been fully indexed, it would have been necessary to increase the basic rate by 3p to recoup lost revenue, which would have meant that 24 million taxpayers would have had a 3 per cent. increase in their marginal rate, which in turn would have had an extremely harmful effect on incentives.

Mr. Robert Sheldon: Does the right hon. and learned Gentleman recall that the tax cuts of two years ago were supposed to improve incentives? Since the Budget the burden for basic rate taxpayers is higher than it was under the previous Government. What effect will that have on incentives?

Mr. Brittan: I did not say that the figure given by the hon. Member for Caernarvon (Mr. Wigley) was correct. As I said, by retaining the change in the basic rate that my


right hon. and learned Friend introduced it has been possible to keep the benefit of a basic rate for 24 million taxpayers which encourages incentives.

Mr. Stoddart: Does not the right hon. and learned Gentleman feel ashamed that the Budget has had the result pointed out by the hon. Member for Caernarvon (Mr. Wigley), in view of the promises made by the Prime Minister and his right hon. and hon. Friends at the election to reduce income tax, and the promise of the Chancellor and the Financial Secretary prior to the election to index tax allowances?

Mr. Brittan: I do not feel ashamed of the fact that, in spite of economic pressures, my right hon. and learned Friend has been able to retain in the Budget the reduction in the basic rate of income tax that he introduced. That demonstrates the priority that he gives to retaining incentives.

Oral Answers to Questions — PRIME MINISTER

Engagements

Ql Mr. Barry Jones: asked the Prime Minister if she will list her official engagements for 26 March.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today. This evening I shall give a dinner for the Commonwealth Heads of Government and others who will be attending tomorrow's special meeting of the Privy Council.

Mr. Jones: What urgent action will the Prime Minister take to push new industries into areas of steel and textile closures, which are suffering from heavy unemployment? Is she taking an interest in the Nissan-Datsun project? Could it not he located in an area of heavy unemployment?

The Prime Minister: It would be wrong for us to attempt to influence the location of the Nissan project, assuming that it comes here after the feasibility study is completed. We hope that it will go to a development area, but there are rival claims and the decision must remain with Nissan.

Mr. Marlow: Is my right hon. Friend aware that from today there are three parties of the Left, equally divided; one between the Solidarity and Tribune groups, one between the hon. Member for Rochdale (Mr. Smith) and the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), and one with the right hon. Member for Stockton (Mr. Rodgers), who, in Northamptonshire last week, was in a stand-up fight with other members of the group, which cannot even agree at this stage? Does she agree that there is only one party of the centre with the leadership, unity, determination and policies to solve the very difficult problems that face the country?

The Prime Minister: There may be three parties, but they are all divisions of Socialism.

Mr. Foot: Will the right hon. Lady accept that, if she believes that the so-called Social Democratic Party has much to do with Socialism, she is the only one in the kingdom who does so? May I ask her a serious question? Will she explain what is meant by the "natural rate of

unemployment" that Treasury spokesmen mentioned to a Select Committee? Is it not wrong to introduce the idea that there is a natural rate of unemployment of about 5 per cent.? Even though her Government have increased unemployment by 1 million, does she agree that there is no reason for accepting a permanent pool of unemployment at that level?

The Prime Minister: It is not a Treasury concept. It is an academic concept, invented some time ago. I have never agreed with it or thought it sound. The Treasury was asked to make assumptions, and it gave the figures that it was required to give, but that does not mean that the Treasury agrees with the concept.

Mr. Foot: In that case, will the right hon. Lady give instructions to the Treasury not to present this kind of nonsense to the country as it can give rise to very wide misconceptions? Will she issue those instructions today?

The Prime Minister: The request came from the Treasury and Civil Service Select Committee. Surely the right hon. Gentleman is not asking me to tell the Treasury to issue instructions to the Treasury and Civil Service Select Committee about what it may or may not ask.

Mr. Foot: Will the right hon. Lady now tell us who invented the phrase the "natural rate of unemployment"?

The Prime Minister: The phrase was invented by academics. I cannot tell the right hon. Gentleman which academic invented it, but if he goes back to the academic literature on economics for a change he will surely find it.

Dr. Mawhinney: Has my right hon. Friend seen the article in The Times today, which reports that Civil Service union leaders are crowing that, as a result of their damaging action against the rest of the country, they have tripled State borrowing? Will she assure the House that if it is necessary to recoup that extra State borrowing it will be done at the expense of the Civil Service cash limit, and not at the expense of the rest of the people of this country?

The Prime Minister: If we cannot get in all the money that we require, it will, of course, put up State borrowing. In the short term, that could have quite damaging consequences for the rest of industry. I therefore hope that civil servants, who, like most of us in the House, rely on a prosperous industry, will think of that before they continue the strike. The more that civil servants demand over and above the 7 per cent., the less there will be for the capital investment that industry sorely needs.

Mr. Mike Thomas: Far be it from me to intrude on this private quarrel, but will the right hon. Lady ponder on the fact that the emergence of the Social Democratic Party has less to do with her theories of monetarism or the right hon. Gentleman's theories of Socialism than with the future of the country?

The Prime Minister: I recall hearing a comment on the radio this morning about the Social Democratic Party being a new centre party. I heard someone say that such a centre party would be a party with no roots, no principles, no philosophy and no values. That sounded about right, and it was Shirley Williams who said it.

Mr. Lang: asked the Prime Minister if she will list her official engagements for Thursday 26 March.

The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.

Mr. Lang: Will my right hon. Friend find time in her busy day to consider the cost of meeting in full the pay claim of our excellent Civil Service? Does she agree that, at £700 million, it is equivalant to 7p on a pint of beer or 20p on a packet of cigarettes, and is more than the people of this country should be asked to pay?

The Prime Minister: To meet the claim in full would cost about £700 million. I think that the figures given by my hon. Friend are about right. It would also put an intolerable increasing burden on the retail price index, and is really out of the question. As I have said before, I hope that civil servants will bear in mind that we rely on industry to finance us and that they will give some thought to those people, some of whom have no jobs, and many of whom have received far less than a 7 per cent. wage increase this year.

Mr. Meacher: Is the Prime Minister aware that the tax burden as a percentage of gross national product was 40 per cent. when the Labour Government left office, that it rose last year to 44½ per cent., and that following the Budget it is officially forecast to rise to 47½ per cent. next year? How is that consistent with the chief pledge by which she got herself elected, namely, to cut taxes?

The Prime Minister: If public expenditure levels were where the hon. Gentleman wishes them to be, the tax burden would be even greater.

Mr. Eggar: In view of the decision today to withdraw the Petroleum and Continental Shelf Bill, will my right hon. Friend confirm that when it is reintroduced it will contain a definite decision to sell the equity in the BNOC, rather than just power to do so?

The Prime Minister: It is not that the Bill has been withdrawn. We do not think that we could necessarily complete it during this parliamentary Session. We shall attempt to pass it as soon as we can. We think that the form in which the Bill is drafted is about right.

Mr. Donald Stewart: How does the Prime Minister expect freedom from strife in the country when the Government have broken a solemn promise made to the Civil Service?

The Prime Minister: I assume that the right hon. Gentleman is referring to the withdrawal for the time being of the pay agreement. Yes, it has been withdrawn. The Labour Government also withdrew it. We have already given civil servants pay increases that mean that this year they are paid 50 per cent. more than two years ago. On top of that, there is a 7 per cent. increase. I think that on any measure of judgment that is good treatment for our public servants.

Mr. Kilfedder: How vehement a protest did the Prime Minister deliver to the Eire Prime Minister when she met him two days ago, following the statement by his Foreign Minister that the Anglo-Eire Study Group would lead to a united Ireland within five to 10 years? Will she suspend those talks until we have a debate in the House, when she can make a full and detailed statement on what was agreed between her and Mr. Haughey?

The Prime Minister: I made it perfectly clear that we disagreed totally with the relevant interview and were very distressed that it had occurred and that the former understanding that there should be no discussion of the

constitutional status of Northern Ireland was the one on which we were proceeding, and shall continue to proceed, and which stands.

Mr. Flannery: Will the Prime Minister turn her mind for a moment away from the fairy tales of Milton Friedman to the serious situation in El Salvador? Although Conservative Members seem to think that this is a joke, will she use her waning influence with President Reagan, who is twirling his atomic pistols in front of the world, and tell him that the last time that the Americans intervened in a small country, by the name of Vietnam, they got a bloody nose, and that the whole world hopes that they will not intervene in El Salvador but will leave the people of that country to determine their own fate, as they are eminently capable of doing if they are left to their own devices, against the brutal tyranny that exists there at the moment?

The Prime Minister: I do not think that the way in which the hon. Gentleman puts his comments is a classic example of how to win friends or influence anyone.

Mr. Michael Spicer: asked the Prime Minister if she will list her official engagements for 26 March.

The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.

Mr. Spicer: Will my right hon. Friend put the full weight of her authority in office behind the hon. Member for Rochdale (Mr. Smith), who is reported to have said yesterday that he was sickened by the credibility given to the fourth party, and that the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) really ought to do something about it?

The Prime Minister: As the hon. Gentleman to whom my hon. Friend refers is not present—there is just a rather large gap on the Bench—I think that I shall not comment.

Mr. Hooley: As the Treasury, presumably on behalf of the Government, has given evidence to a Select Committee of the House and said that 5 per cent. unemployment is regarded as normal, why has the Treasury, in preparing the public expenditure document—again, presumably on behalf of the Government—put in a figure of 2·7 million for unemployment, which is 10 per cent. in 1982–83 and 1983–84?

The Prime Minister: What the hon. Gentleman says is just not true. The Treasury was asked to give figures on certain assumptions on certain concepts. It neither agreed nor disagreed with those concepts, but it responded by trying to give the figures which, on those parameters, would be fed into the Treasury model.

Mr. McQuarrie: Has my right hon. Friend's attention been drawn to the decision by certain petrol companies to increase pump prices by 2p and 4p? In view of the devastating effect that my right hon. and learned Friend's Budget had on rural areas, does she accept that this latest increase is to be deplored?

The Prime Minister: The Budget would have contained far fewer increases in indirect taxes had we agreed much lower public spending. That is a fundamental fact. Secondly, I understand why my hon. Friend does not wish there to any any further increase in petrol prices, but


a considerable price war is going on between the petrol companies, and it seems that people will not have to pay the full increases.

Security

The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I will make a statement about the security implications of the book published today that purports to give a detailed account of the investigations into the penetration of the Security Service and other parts of the public service that were undertaken following the defection of Burgess and Maclean in 1951.
The events into which those investigations were inquiring began well over 40 years ago. Many of those named or implicated in this book as having been the subject of investigation have died. Others have long since retired. None of them is still in the public service.
The extent of penetration was thoroughly investigated after the defection of Burgess and Maclean, as, indeed, the author of the book makes clear. The book contains no information of security significance that is new to the security authorities, and some of the material is inaccurate or distorted. All the cases and individuals referred to have been the subject of long and thorough investigation.
The investigations into the possibilities of past penetration have inevitable extended widely. They have covered not only those suspected of being guilty but all those who could conceivably fit the often inconclusive leads available. The fact that somebody has been the subject of investigation does not necessarily, or even generally, mean that he has been positively suspected. Many people have had to be investigated simply in order to eliminate them from the inquiry.
The results of the investigations into Philby and Blunt are now well known. There were good reasons for suspecting a few others, but as it was not possible to secure evidence on which charges could be founded they were required to resign or were moved to work where they had no access to classified information. Many others were eliminated from suspicion.
Apart from the main allegation, to which I will come, I do not propose to comment on the allegations and insinuations in the book. Nor can I say which allegations are unsubstantiated or untrue—as some certainly are—since by doing so I should be implicitly indicating those that were suspected of having a degree of substance.
I must, however, comment upon the grave allegation that constitutes the main theme of the book—that the late Sir Roger Hollis, director general of the Security Service from 1956 to 1965, was an agent of the Russian intelligence service.
The case for investigating Sir Roger Hollis was based on certain leads that suggested, but did not prove, that there had been a Russian intelligence service agent at a relatively senior level in British counter-intelligence in the last years of the war. None of these leads identified Sir Roger Hollis, or pointed specifically or solely in his direction. Each of them could also be taken as pointing to Philby or Blunt. But Sir Roger Hollis was among those that fitted some of them, and he was therefore investigated.
The investigation took place after Sir Roger Hollis's retirement from the Security Service. It did not conclusively prove his innocence. Indeed, it is very often impossible to prove innocence. That is why, in our law, the burden of proof is placed upon those who seek to establish guilt and not on those who defend innocence. But no evidence was found that incriminated him, and the

conclusion reached at the end of the investigation was that he had not been an agent of the Russian intelligence service.
This view was challenged, however, by a very few of those concerned, and in July 1974, Lord Trend, the former Secretary of the Cabinet, was asked to review in detail the investigations that had taken place into the case of Sir Roger Hollis and to say whether they had been done in a proper and thorough manner, and whether, in his view, the conclusions reached were justified. Lord Trend examined the files and records and discussed the case with many of those concerned, including two people who considered that the investigation should be reopened.
Mr. Pincher's account of Lord Trend's conclusions is wrong. The book asserts that Lord Trend
concluded that there was a strong prima facie case that MI5 had been deeply penetrated over many years by someone who was not Blunt",
and that he
named Hollis as the likeliest suspect".
Lord Trend said neither of those things, and nothing resembling them. He reviewed the investigations of the case and found that they had been carried out exhaustively and objectively. He was satisfied that nothing had been covered up. He agreed that none of the relevant leads identified Sir Roger Hollis as an agent of the Russian intelligence service, and that each of them could be explained by reference to Philby or Blunt. Lord Trend did not refer, as the book says he did, to
the possibility that Hollis might have recruited unidentified Soviet agents into MI5".
Again, he said no such thing.
Lord Trend, with whom I have discussed the matter, agreed with those who, although it was impossible to prove the negative, concluded that Sir Roger Hollis had not been an agent of the Russian intelligence service.
I turn next to the arrangements for guarding against penetration now and in the future.
All Departments and agencies of the Government, especially those concerned with foreign and defence policy and with national security, are targets for penetration by hostile intelligence services. The Security Service, with its responsibilities for countering espionage and subversion, is a particularly attractive target. Recent security successes, such as the expulsion of members of the Russian intelligence service from this country in 1971, would hardly have been achieved if the Security Service had been penetrated.
The Security Service exercises constant vigilance not only against the risk of current penetration but against the possibility of hitherto undetected past penetration, which might have continuing implications. But, however great our confidence in the integrity and dedication of those now serving in the Security Service, we need to make sure that the arrangements for guarding against penetration are as good as they possibly can be, both in this area and throughout the public service.
Existing security procedures were introduced during the years following the Second World War. Burgess, Maclean, Philby and Blunt were all recruited by the Russian intelligence service before the Second World War and came into the public service either before or during the war, well before existing security procedures were introduced.
It was in 1948 that the then Prime Minister announced the Government's intention to bar Communists and Fascists and their associates from employment in the


public service in connection with work the nature of which was vital to the security of the State. This led to the introduction of what came to be known as the "purge procedure".
In 1952 the positive vetting procedure was instituted, with the object of establishing the integrity of civil servants employed on exceptionally secret work. In 1956 it was publicly declared that character defects, as distinct from Communist or Fascist sympathies or associations, might affect a civil servant's posting or promotion. In 1961 security procedures and practices in the public service were reviewed by an independent committee under the chairmanship of the late Lord Radcliffe.
The committee's report, published in 1962, contained an account of those procedures and made various recommendations for modifying them, which the Government accepted. These procedures, as modified in 1962, are still in operation.
These arrangements have over the years substantially reduced the vulnerability of the public service to the threat of penetration and have served the interests of national security well. But it is 20 years since they were last subject to independent review. In that time the techniques of penetration and the nature of the risks may have changed. We need to make sure that our protective security procedures have developed to take account of those changes. I have therefore decided, after consultation with the right hon. Gentleman the Leader of the Opposition, to ask the Security Commission
To review the security procedures and practices currently followed in the public service and to consider what, if any, changes are required".
These terms of reference will enable the Security Commission to review, and to make recommendations as appropriate on, the arrangements and procedures used in all parts of the public service for the purposes of safeguarding information and activities involving national security against penetration by hostile intelligence services, and of excluding from appointments that give access to highly classified information both those with allegiances that they put above loyalty to their country and those who may for whatever reason be vulnerable to attempts to undermine their loyalty and to extort information by pressure or blackmail.
There are difficult balances to be struck here between the need to protect national security, the nature and cost of the measures required to do so effectively, the need for efficiency and economy in the public service, and the individual rights of members of the public service to personal freedom and privacy. The Security Commission will be able to consider how these balances ought to be struck in the circumstances of the present time, as it conducts its review and prepares its recommendations. It will be my intention to make its findings known to the House in due course, to the extent that it is consistent with national security to do so.
In conclusion, Mr. Speaker, I should like to emphasise once again that this statement arises out of a book that deals with investigations of matters and events that occurred many years ago. My concern is with the present and with the future. That is why I am asking the Security Commission to undertake the review that I have described.

Mr. Michael Foot: Although it is not always the custom to make statements to the House on such matters, I am sure that the right hon. Lady was right to do so in this instance. The House and the country will

be grateful to her for having done so. In different parts of her statement she emphasised the fact that some of the material in the book was unsubstantiated, untrue, inaccurate and distorted. That must be taken into account. Individuals can be grossly misjudged and defamed by such material. People should take account of such matters, whether they are writing about the dead or the living.
Some of the newspaper reports included material that, in the right hon. Lady's words, was "inaccurate or distorted", as if it were proven and unchallengeable. Such reports could also lead to grave injustices. In addition to the extremely important security questions involved, those matters must be taken into account.
When the right hon. Lady put the proposal to me that we should have a commission of investigation, with the suggested terms of reference, I thought that that was the right course for the Government and the House to take. I certainly support it. I should like to call the attention both of the House and of the right hon. Lady to the statement made by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), the previous leader of the Labour Party. When these matters were debated in the House on 21 November 1979 he made a recommendation to the Government concerning the appointment of an inquiry. He did so following the changes in security arrangements that my right hon. Friend the former Home Secretary had made as a result of certain revelations.
My right hon. Friend the Member for Cardiff, South-East proposed that there should be an inquiry. He said:
We could discuss how it were done, what its terms of reference were and who would conduct it. It would report back on whether any change were needed in relations between Ministers and the heads of the services, or whether Parliament could be involved more, not in the decisions, but in the rules and in the way in which they were applied and observed".—[Official Report, 21 November 1979; Vol. 974, c. 511.]
I hope that the right hon. Lady will take into account all my right hon. Friend's recommendations. I agree that the House should be primarily concerned with the present and the future rather than the past. It is right that the House should adopt the recommendation that the right. hon. Lady has made and I certainly hope that it will be adopted.

The Prime Minister: I am grateful to the right hon. Gentleman for what he said and for the spirit in which he said it. I especially agree with some of his earlier comments. I remember when my predecessor, the former Prime Minister, made some comments in the debate on Blunt. I have now made references to the Security Commission. During that debate I announced certain changes in accountability between the director general of the service and Ministers. It would be best to rest on those new arrangements for the time being.

Sir Harold Wilson: Is the right hon. Lady aware—I think that she is—that with her agreement I refreshed my memory about what I was told about Sir Roger Hollis' pre-Civil Service connections at university and elsewhere? There were reasons for anxiety. However, two other persons—either Philby or Blunt, or both—would have been a sufficient cause for anxiety. The right hon. Lady referred to the Trend inquiry, which I set up in 1975. Will she confirm that Lord Trend spent nearly a year on that inquiry and felt that what successive Governments had done had been thoroughly and objectively investigated? There was certainly nothing that could substantiate any accusation of a cover-up. He agreed with the conclusions of those who were satisfied that


Hollis had not been a spy, although, according to the report, the inquiry's members felt that they would not be able to prove that 100 per cent. Will the right hon. Lady confirm that although Sir Roger Hollis operated during seven premierships—including my own—I was the first to set up an independent inquiry? Indeed, I am very glad that she is setting up this inquiry.

The Prime Minister: The date of the inquiry—I think that it was July 1974—shows that the right hon. Gentleman set up the Trend inquiry. Lord Trend certainly took a full year on it. It was an exhaustive inquiry, in that it examined all the documents and also interviewed people. There is no doubt about its conclusion, as the right hon. Gentleman said. Since the premiership of the right hon. Gentleman, all Prime Ministers and Home Secretaries have been told of the results of that inquiry.

Sir Derek Walker-Smith: Does my right hon. Friend appreciate that thinking people will give the Prime Minister a warm welcome both for her reference to the Security Commission—under the distinguished and objective chairmanship of Lord Diplock—and for her characteristically full and frank statement? It was at least equal to, and probably superior to, any statement made on security matters within the recollection of the House.
Will my right hon. Friend continue to have regard to the importance of not prejudicing the work of the Security Service? Does she recognise that a Prime Minister of this country is under no duty to canvass on the Floor of the House every allegation or insinuation made by private persons against people—regardless of whether those people are alive or dead, whether the allegations are made orally or in print, and whether or not they are made for gain?

The Prime Minister: I entirely agree with everything that my right hon. and learned Friend said. It would be appalling if we had defamation by allegation in the House. We should be very careful not to do it. I am grateful to my right hon. and learned Friend for pointing out that it is unusual to have a statement in such detail as this on security matters. There is not much that I can usefully add, because, as my right hon. and learned Friend pointed out, in an open society we must have security services and they must necessarily operate partially in secret. We must protect them in doing that.

Mr. Speaker: Order. I propose to call three hon. Members from either side and then to move on to other business.

Mr. A. E. P. Duffy: Is the Prime Minister aware that the House has heard assurances and denials on national security before, but scandals and rumblings of scandals have endured? The House understands her contention that in any assessment of the integrity of a security officer it is impossible to prove the negative, but is she satisfied that none of the achievements of those years when Philby and Blunt were operating, or when their influence was persisting—the Portland naval spy ring, Blake, Blunt, Vassall and Philby—were mere cover-ups of even greater scandals affecting national security? Will she impress upon the Security Commission the importance, in future and recent recruitment, of

selecting a different type of officer, from a different social background—someone who is well aware of the social conditions of the entire country and not one part of it? She may stumble, and the House may stumble, on a more patriotic, dependable and reliable officer.

The Prime Minister: With respect, I do not think that the hon. Gentleman's words do full justice to our security services, in whom I have the greatest confidence. The events referred to in the book published today were events of 20 to 40 years ago, by a group that was recruited just before or during the war. I am concerned now with the future. I am sure that the hon. Gentleman will agree with that. I assure the hon. Gentleman that security services recruit from all social backgrounds. They are anxious to obtain those most suitable and appropriate for the difficult work that they have to do. I hope that the hon. Gentleman will join the rest of us in paying tribute to and recognising the value of that difficult work.

Mr. Julian Amery: Does my right hon. Friend agree that in the perennial clandestine war there are bound to be casualties on both sides, but that the number of defections to our side has been considerably greater than the other way? Will she take the opportunity to pay tribute to the remarkable successes of our intelligence and counter-intelligence organisations, which, for obvious reasons, cannot be publicised?.

The Prime Minister: My right hon. Friend is pointing out that the defections the other way have far exceeded any defections from this country to Soviet Russia and, indeed, have given us a great deal of information. The successes of the security services, even the known ones, have been very considerable. The Lonsdale case, and the cases concerning Houghton and Gee, the Krogers, Vassall and Blake was all successes, and so were the expulsion of over 100 spies from the Soviet embassy in the early 1970s.

Mr. Richard Wainwright: Does the Prime Minister accept that the review that she has just announced, welcome though it is, is unlikely to provide full reassurance to the public unless it is known that the commission is examining carefully every possibility of making the Security Service more responsible to Ministers? In that connection, will she bear in mind that the Security Commission at present contains no one who has ever been elected to public office? Will she consider the possibility of adding to the commission, for the review, one or more suitable persons who have been Members of the House?

The Prime Minister: No, Sir. The Security Commission has been set up and has been in existence for some time. During the Blunt debate I announced changes that made the director-general of the Security Service more responsible to Ministers. I think it is best if we let those work for a time.

Mr. Raymond Whitney (Wycome): I add my congatulations to my right hon. Friend on the way that she has responded to this difficult problem. Does she agree that we as a nation should be playing into the hands of our adversaries—who have succeeded on occasions in the past in subverting elements in our security services—if we allowed our natural concern about those successes, generations or decades ago, to damage the present morale or operating efficiency of our services today or in the future?

The Prime Minister: I agree with my hon. Friend. The security services are a vital part of the defence of our country. It is important that we enable them to continue to do their work properly.

Mr. Leo Abse: Is there not a clear need to strengthen still further the rigours of the Security Service selection board which was introduced in 1977, so that the motivation of candidates is probed in depth? The dangers are increasing. We face dangers in admitting those whose private heterosexual infidelities bear witness to their incapacity for loyalty, or those whose disturbed homosexuality—following a long line of spies from Marlowe, to Casement, to Burgess and Blunt—means that they are compulsively disloyal. Surely it is time that we sophisticated our procedures and brought in psychoanalysts and psychiatrists to be attached to the board, so that we do not use out-of-date, old-fashioned, rule-of-thumb methods of selection. If the Prime Minister is looking to the future as she says, surely it is time that we made certain that our selection procedures were worthy of the twentieth century and not the nineteenth century.

The Prime Minister: That is exactly what the terms of reference will enable the commission to do, among other things. The terms of reference are:
To review the security procedures and practices currently followed in the public service and to consider what, if any, changes are required.
What the hon. Gentleman said will be within the terms of reference.

Mr. Kenneth Warren: I welcome the Prime Minister's statement. Will she give an a sssurance to the House that she is well aware of the disinformation practices of the KGB, which seek to undermine the credibility of loyal citizens and thus draw fire away from secret agents still in position? I feel that that might mistakenly be inherent in some of the statements in the book.

The Prime Minister: I am very well aware of the disinformation practices of the KGB. That is one of the difficulties with which the security services have to contend. Beyond what I have said, I do not wish to comment further on the allegations in the book.

Mr. Dennis Canavan: On a point of order, Mr. Speaker. I was the first hon. Member to table a question to you about this matter——

Mr. Speaker: Order. The hon. Gentleman is his customary self, but he must obey the rules of the House.

Business of the House

Mr. Michael Foot: Does the Leader of the House have a statement to make about the business for next week?

The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): Yes, Sir. The business for next week will be as follows:
MONDAY 30 MARCH—Supply [14th Allotted Day]: Debate on unemployment in the Midlands, on a motion for the Adjournment of the House.
Remaining stages of the Parliamentary Commissioner (Consular Complaints) Bill [Lords].
TUESDAY 3I MARCH—Remaining stages of the Forestry Bill and the Criminal Attempts Bill.
Motions relating to the National Health Service (Dental and Optical Charges and Remission of Charges) Regulations.
WEDNESDAY I APRIL—Remaining stages of the British Telecommunications Bill.
THURSDAY 2 APRIL—Remaining stages of the Energy Conservation Bill [Lords].
Motion on EEC Document 4460/80 on research and development in biomolecular engineering, and on the Department of Industry's Supplementary Memorandum of 8 December 1980.
Motion on Queen's University of Belfast (Northern Ireland) Order.
The Chairman of Ways and Means has set down opposed private business for consideration at 7 o'clock.
FRIDAY 3 APRIL—Private Members' motions.
MONDAY 6 APRIL—Remaining stages of the Insurance Companies Bill.
The House will wish to know, Mr. Speaker, that it will be proposed that the House should rise for the Easter Adjournment on Thursday 16 April until Monday 27 April.
[Debate on the European Community document relating to biomolecular engineering. The relevant reports of the European Legislation &amp;c. Committee are: 21st Report 1979–80, H/C 159-xxii para. 5; 38th Report 1979–80, H/C 159-xxxviii para. 2; and the 9th Report 1980–81 H/C 32-ix para. 1]

Mr. Foot: The terrifying unemployment figure is the main domestic question facing the nation. The time for Monday's debate is provided by the Opposition. I urge the Leader of the House to take into account my request for Government time for continuous debates on that subject, which the House must have to deal with the matter properly. I hope that the Government will provide the time to debate next month's unemployment figures.
I wish to raise three other matters. When will we have the debate on public expenditure that the right hon. Gentleman promised last week? When will we have a debate on the Government's energy policy, for which we have asked on a number of occasions? Will the right hon. Gentleman confirm that the Petroleum and Continental Shelf Bill, about which the Government have become properly bashful, has been abandoned for this Session? We hope that it will be abandoned altogether. Will he assure the House that he will not introduce it this Session?

Mr. Pym: I note the right hon. Gentleman's first point. Since the new year the Government have provided a day


to debate unemployment. It is a serious matter and we thought it appropriate to provide time. I cannot give him a commitment, but I note his request for yet another day. It is our intention to debate the public expenditure White Paper before Easter and before the Second Reading of the Finance Bill. The right hon. Gentleman made that request on an earlier occasion. We shall debate energy tomorrow. It may not be what he wants, but tomorrow's debate could last for up to five hours.
There are pressures on the legislative timetable which make it unlikely that further progress will be made this Session on the Petroleum and Continental Shelf Bill. On the other hand, the Government remain committed to the Bill. It is set out as we believe to be appropriate. We intend to reintroduce it in its present form during the next Session and to give it appropriate priority.

Mr. John Peyton: Will my right hon. Friend find time next week for a statement, if not for a debate, about the Civil Service dispute? I understand that the Government wish to avoid exacerbating or provoking matters, but it is important that the public should understand what is happening and what is in the Government's mind.

Mr. Pym: I note my right hon. Friend's request. I agree that the matter is important. Negotiations are taking place between the Government and the unions. It has been, and is, our view that it is not appropriate, and would not further the resolution of the dispute, to hold a debate. I shall keep my right hon. Friend's request in mind.

Mr. George Foulkes: Is the Leader of the House aware of the recently published White Paper on the elderly entitled "Growing Older", which covers all aspects of the care of the elderly? Will he arrange for a debate on that topic so that we can give detailed consideration to all aspects of that important matter?

Mr. Pym: Much as I should like to do that, I cannot envisage an opportunity to do so in the near future.

Mr. Charles Morrison: When will the Government's response to the report of the Select Committee on Foreign Affairs entitled "British North America Acts: The Role of Parliament" be available? Will my right hon. Friend provide time to debate the report before the House considers any request from the Canadian Government in connection with the Canadian constitution?

Mr. Pym: The Government have made progress in preparing their response to the report. It will probably be published at about the time that we expect the proceedings in Ottawa to reach a conclusion. A debate on the subject is very much in my mind, but I cannot say when it will take place.

Mr. D. N. Campbell-Savours: Will the Leader of the House consider changing Trade, Industry and Energy questions from Monday to later in the week to enable Members from far-off regions of the United Kingdom to participate fully in questions on those matters, especially as they relate to unemployment?

Mr. Pym: We must adhere to the view that 2.30 pm on a Monday is a reasonable time for Members to be here. However, it is a fair request that can be considered through the usual channels.

Mr. John Hannam: Is my right hon. Friend aware that there will be some disappointment about his announcement of a delay in the Petroleum and Continental Shelf Bill? Is he further aware that the BNOC is about to place a $130 million order for a semi-submersible rig with a Norwegian company building in France? Will he make a statement about that, in view of the desirability of attracting employment to Britain rather than to other countries?

Mr. Pym: I am sorry that more Government time is not available to deal with important matters. I shall consult my right hon. Friend the Secretary of State for Energy about the important matter raised by my hon. Friend.

Mr. Christopher Price: Will the Leader of the House provide time next week for a debate on the Prime Minister's statement? Is he aware that it is not satisfactory to leave the investigation of those matters in the hands of judges? Does he subscribe to the proposition that only judges, and never Members of the House, should be in charge of the scrutiny of our security services?

Mr. Pym: It would not be appropriate to debate the statement of my right hon. Friend the Prime Minister. I have nothing to add to what she said in answer to a question a few minutes ago.

Mr. Eldon Griffiths: I refer to the question raised by my hon. Friend the Member for Devizes (Mr. Morrison) about the British North America Acts. Will my right hon. Friend explain more clearly what he said in his reply? My hon. Friend asked for a debate on the Select Committee report. Are the Government proposing to handle that matter simultaneously with the proposal to the House of any legislation that might arise from a Canadian Government request? I hope that the House will be able to debate the Select Committee report by itself without its being muddled with any questions arising from Canada.

Mr. Pym: When I answered the question raised by my hon. Friend the Member for Devizes (Mr. Morrison) I did not venture into the area touched upon by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths). I said that the preparation of the reply was well advanced and that it would probably be presented to the House at about the same time as the proceedings in Ottawa were concluded, and that we would then consider providing time for a debate. During such a debate we should consider not only the Select Committee report but the Government's reply to it.
I made no statement about connecting the report with any other legislation or business. As I said earlier, any matter relating to procedings that may come before the House about a request from Canada can be attended to only when that request has been received. As the House knows, it has not yet been received.

Mr. Greville Janner: I welcome Monday's debate on the unparalleled scourge of unemployment in the Midlands. Will the Leader of the House consult with his right hon. Friend the Secretary of State for Employment to consider whether figures can be made available on the hidden unemployment of short-time working? Is he aware that in Leicester, which has an unemployment level of about 10 per cent., the level of short-time working is more than 15 per cent.? It is almost


impossible to obtain accurate figures. Will the right hon. Gentleman seek to have those figures made available so that the debate can have real meaning in relation to both visible and hidden unemployment alike?

Mr. Pym: I shall convey the hon. and learned Gentleman's request to my right hon. Friend to see whether it is possible to include any remarks in relation to the figures. It has been suggested that the Front Bench speeches on this occasion might be briefer than tends to be normal in order to allow plenty of time for Back Bench speeches.

Mr. T. H. H. Skeet: On raising the matter of the Petroleum and Continental Shelf Bill last week, I was given a rather abrupt reply. Is my right hon. Friend aware that I was surprised to learn all about the matter in the Financial Times this morning? How has a leak occurred? This matter has been considered for two years. Will the Government make up their mind about whether the Bill is to come before the House in three years or four years? We want it early.

Mr. Pym: In the legislative programme there are many candidates for early action. I am sorry that the Bill in which my hon. Friend has taken a particular interest and to which he rightly attaches great importance has got into difficulties in this Session because of pressure on the timetable. I can only repeat that the Government wish to bring in the Bill in its present form with a high degree of priority in the next Session.

Mr. Alfred Dubs: The Leader of the House will be aware of the widespread support for the recent action of the Home Secretary in banning marches by the National Front and other racist organisations. However, is he aware that there is a great deal of concern that one consequence of the ban is that many other legitimate marches cannot take place? The longer-term implications are that this is a threat to the democratic right to march and demonstrate. If the right hon. Gentleman agrees, will he arrange for an early debate to enable hon. Members to discuss the implications of a matter of increasing concern and importance?

Mr. Pym: I shall, of course, consult my right hon. Friend the Home Secretary on this important matter. One has to strike a difficult balance in this area. One can have too much of a good thing. There are occasions, however regretfully, when the Home Secretary judges it best to have a period when marches are banned.

Mr. Christopher Murphy: May I draw the attention of my right hon. Friend to early-day motion 283, on continuation of the Sea Eagle project?
[That this house welcomes the decision of Her Majesty's Government to continue development on the Sea Eagle anti-ship missile as outlined in the Defence Estimates 1980–81 statement on 20th January, recognises that further consideration of the programme is to take place in the light of the coming Defence Review, and urges that full cognisance be given to the following key facts pertaining to the project: that the missile is of immense value in itself, being the most advanced of its kind and of considerable significance in strengthening the United Kingdom's defensive position in the world; that the technical expertise surrounding its development could ill

afford to be lost and that further missile projects would lean heavily on the knowledge being gained; that export opportunities of benefit to the United Kingdom are closely associated with the missile and any cessation of work would necessitate purchasing from the United States with clear balance of trade implications; and that jobs at the Dynamics Division of British Aerospace at Hatfield could be put at risk, as might those in associated companies, should the missile be cancelled.]
As my constituents give full backing to the Government's defence policy, and as my constituents in British Aerospace give full backing to the continuation of this missile project, will my right hon. Friend give full backing to the motion by arranging for a debate in the very near future and certainly before the defence review on this important topic?

Mr. Pym: I can assure my hon. Friend that very careful consideration is being given to this project, which is obviously of great importance for it to have reached this stage. However, it has to be considered along with all the other priorities that the Government have to take into account. I cannot give my hon. Friend any hope about time for a debate. I can assure him that a great deal of care and thought is being given to the future of this project.

Mr. Bob Cryer: Will the Leader of the House assure us that he will give serious consideration to debating the findings of the Security Commission? He will recall that the Prime Minister said that she indended to make the findings available to the House. One of the advantages that we claim is that we have a democratic system. Surely it is necessary to demonstrate that the security services have the same degree of accountability to the House through the means of a debate.

Mr. Pym: That is a matter that we should attend to when the time comes.

Mr. Julian Amery: I recall an assurance some time ago that there would shortly be a debate on foreign affairs. As the world seems to be fairly troubled and Britain is not yet a local country, will my right hon. Friend give an assurance that there will be a debate before Easter?

Mr. Pym: Unfortunately, I cannot inform my right hon. Friend that there will be a debate before Easter. I hope to provide time very soon after Easter.

Mr. Dennis Skinner: Will the Leader of the House reconsider his decision not to have a debate in relation to the statement on the security services? Some of us would like a debate to ensure that reference was made to infiltration by the CIA into the security services as well as other organisations. Hon. Members would perhaps also be able to place on record the fact that during this whole series of investigations of certain persons throughout the many decades to which the Prime Minister referred she never mentioned a miner, a dustbin man, a railwayman or a Left-wing shop steward. None of these has betrayed the country.

Mr. Pym: I do not think that the debate for which the hon. Gentleman asks would be appropriate. I adhere to the view that I expressed earlier.

Common Agricultural Policy

Mr. Speaker: I have selected the amendment in the name of the right hon. Gentleman the Leader of the Opposition.

The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): I beg to move,
That this House takes note of the European Community Documents Nos. 5091/81 and 5091/81 Addendum I on Common Agricultural Policy prices 1981–82; 5191/81 on the Agricultural Markets Situation 1980; 12271/80 on Reflections on the Common Agricultural Policy; and the Ministry of Agriculture, Fisheries and Food's unnumbered explanatory memorandum of 17 March on the development of livestock production in Ireland; recognises the contribution United Kingdom agriculture makes to the national economy and the need to obtain adequate returns for United Kingdom producers; and supports the Government's intention to seek an agreement designed to reduce production of structural surpluses where these exist, to contain the cost of the Common Agricultural Policy and to take account of the interests of consumers and of food processors.
I have no particular objection to the Opposition amendment, although I shall be interested to hear from the right hon. Member for Barnsley (Mr. Mason) his definition of phrases like
the need to hold down prices".
I interpret it as a request that on those items in surplus there should be prudence in prices and a holding down of prices in real terms rather than in money terms. There can be no doubt that recently farm prices generally have been severely held down.
We discuss the motion on the Order Paper and the various associated documents in an atmosphere in which British agriculture has experienced financial restraint and difficulty. As the White Paper I published shows, there was a reduction of 10 per cent. in incomes in money terms during the last year, which means, in real terms, a reduction of 24 per cent. This is reflected in the substantial increase that took place in bank advances during this period. The increase in bank advances was not caused by an increase in capital investment. It was mainly due to the needs and requirements of farmers in terms of working capital and maintenance of their incomes. The reduction, in real terms of, 24 per cent. covers a considerable disparity between one type of farmer and another and between one region and another. That reduction in income occurred, perhaps fortunately, in a period when we enjoyed for the third successive year a record cereal harvest.
The burden of this restraint on incomes, partly for reasons of skilful work and partly because of good climatic conditions, fell less severely on cereal producers and more severely on livestock producers. It was, therefore, more severe in Scotland and Wales and particularly in Northern Ireland. I hope that the House will join in recognising the considerable contribution made during the last couple of years by the farming community towards the battle against inflation.
I object to various suggestions made from time to time that our farming community has been overpaid. Its contribution has been quite remarkable. During this last year the increase in non-food items in the retail price index amounted to 14 per cent. The increase in food prices amounted to only 9 per cent. During the same period wages increased by 19 per cent. Comparing those figures with an increase in farm gate prices of only 6 per cent.,

I suggest that few sections of the community have made a bigger contribution towards the battle against inflation than the farming community.
Alas, that contribution has been at the price of a reduction in investment. I suggest to those who are concerned about unemployment that it is of no use to pursue an agricultural policy which reduces capital investment in equipment, machinery, tractors and buildings, with a resultant deterioration in the productivity of British agriculture and the many ancillary firms connected with it. Therefore, it is against a background of some depression in farm prices that we look at the position today.
In their amendment the Opposition refer to the overall cost of the common agricultural policy. Those like myself who are concerned about the overall cost of the CAP should be pleased that, as compared with the last year of the Labour Government, when the cost of the CAP went up by 26 per cent. in one year, the cost during 1980 increased by 10 per cent. Since the Conservative Government came to power the rise in the cost of the CAP has been more than halved.
It is in that climate that I turn to the main proposals that we are discussing, the prices put forward by the Commission for the coming annual price review. I find completely unacceptable the Commission's proposals for an overall price increase averaging 7·7 per cent., with a massive devaluation of the green pound. The Commission proposes an overall increase of 1·4 per cent., in money terms, in British farm prices for the coming year. That would mean a massive further reduction in farm incomes, with all the adverse effects that would bring on farm production and all the industries connected with that production. With the level of price increases advocated by the Commission, there is no way in which I would agree to a revaluation of the green pound.
It is surprising that the countries—seemingly with the support of some right hon. and hon. Gentlemen on the Labour Benches—which are in favour of a revaluation of the green pound are the very countries which rejoiced when, during the period of the previous Government, we had enormous negative MCAs.

Mr. Tony Marlow: In answer to a written question last week my right hon. Friend the Secretary of State said that MCAs of 18 per cent. would add to the net budget contribution, over and above that which was negotiated last year, anything up to £240 million. My right hon. Friend says that he will not agree to a revaluation of the green pound because it would affect farmers' incomes, but would it not be possible to allow that revaluation and at the same time support our farmers to the extent of £400 million out of our money, in the same way as the French support their farmers?

Mr. Walker: We all know my hon. Friend's views—his general hostility to Europe as a whole. In my answer to his question I stated that there was an enormous margin between the costs, but in phasing his comment he quoted the highest possible figure. It would have been far less impressive if he had quoted the lowest figure in my reply. This manner of extracting just one figure out of context gives a totally false impression to his argument.
Hon. Members on both sides of the House should reflect upon why, during the period of the Labour Government, when for two years we had negative MCAs


never less than 24 per cent. and sometimes as high as 45 per cent., Denmark, Holland and Germany rejoiced because they were taking a bigger share of the British market. Those countries were then great defenders of the MCA system. Now that we are enjoying positive MCAs—this eradicates the disadvantage of a high sterling exchange rate for certain food products—those same countries are pressing hard for their elimination.
There is no evidence of any substance as to the degree to which a reduction in the MCAs benefits the British consumer. I mentioned earlier this afternoon that during the past year, when we have had positive MCAs, food prices went up by 9 per cent. In the years of the Labour Government, when there were enormous negative MCAs, on average food prices went up by 17 per cent.—hardly an illustration that negative MCAs are a great advantage to the British consumer, or that positive MCAs are a great disadvantage to the British consumer. Negative MCAs were a great disadvantage to our food industry and our manufacturing and processing industries and a great advantage to the profits of foreign exporters. Positive MCAs at their present level and in their present form are a great advantage to British agriculture and to full employment.

Mr. Douglas Hogg: Does my right hon. Friend agree to the proposition that if the green pound were to be revalued as proposed by the Commission it would almost certainly lead to substantial unemployment in the countryside, particularly among farm workers?

Mr. Walker: I certainly agree with that proposition, but I believe that unemployment would extend further than my hon. Friend suggests. There are substantial industries connected with agriculture—machinery and tractors—and already, because of the recession in farm prices, substantial redundancies have occurred in fertiliser factories, for instance. I do not find it logical for any politician who claims to be fighting the battle of unemployment at the same time to wish to undermine British farm prices, with all the effects that my hon. Friend described.
We shall look at each item on its merits and endeavour to see, as the Opposition amendment suggests, that there is a sensible measure of restraint and an attempt to tackle areas where there are surpluses. Before considering some of the individual items in the proposals I want to say a little more about the trend of farm incomes.
Several measures have been announced recently which will affect farm incomes during 1981 and which are not reflected in the farm income position illustrated in my White Paper. All who are connected with agriculture will be pleased at the 5 per cent. reduction in the minimum lending rate. The burden of high interest rates falls particularly hard on the farming community, and the downward trend in interest rates has been welcomed by it. The effect of that 5 per cent. reduction by a series of smaller reductions will primarily come through during the calendar year 1981.
There is a recognition in many spheres of the substantial improvements that will be made to incomes as the result of negotiations that have already taken place. The negotiation of the sheepmeat regime will bring a substantial improvement in guaranteed income for sheep producers, without any adverse effect upon housewives and consumers. The benefit of that was not realised last

year because the regime came in too late. This year's lambing season will be the first to benefit from the new regime. The figures show a substantial change from a couple of years ago. Compared with the lambing season of three years ago there is an improvement in the guaranteed price on the premium system of about 50 per cent.
Similarly, in the beef sector, which is one of the most difficult sectors, the 1981 projections, taking the suggested target prices and therefore the relationship with the premium scheme, are that the figures will be about 50 per cent. better than they were in the calendar year 1978.
The Government can claim that in spite of the difficult conditions, high feeding costs and the difficulties of one particularly bad lambing season, they have been very positive in their attitudes towards the hill farming areas. Checking up on the grants for which we have responsibility, the hill farm subsidies, where we have made the decisions, I am very pleased to say that, compared with the last year of the Labour Government, the cost of the improvements that we have made for the hill farms is 80 per cent. up on what it was in 1978. The income benefits will tend to come through during the calendar year 1981 and will assist in meeting the substantial increases in input costs that are still taking place.
As for input costs for 1981 in the United Kingdom, it is obvious that the input costs of interest rates will be lower. It is also true that the input costs in a number of other areas will be higher. Certainly the world price of oil and its linkage with fertiliser prices is still a worrying concern. Although there was a substantially lower increase in the agricultural wage this year compared with the year before, it was still a very substantial increase, which will have to be met out of this year's farm incomes.
Therefore, I hope that when we talk about restraints in farm incomes on a particular commodity we shall be thinking in terms of the relationship between the input costs and the increase in price and not just making a straight calculation of the increase in price irrespective of a substantial increase in input costs that is taking place.
I turn now to some of the general proposals and first to one of the major proposals affecting this country, that concerning milk. In general, we welcome the fact that the Commission has promised a continuance of the butter subsidy that we negotiated. I think that is essential and also sensible for the Community as a whole as well as being of benefit to British housewifes.
It is important to continue the school milk subsidy, and I hope that the arrangements we are about to complete with the Commission will enable the administration of that scheme to be simple and manageable and will result in a substantial increase in the amount of milk consumed in our schools.
When it comes to the proposals, there should be restraint in terms of the price increases here, balanced against the increased input costs. Because of our substantial dependence upon the liquid milk income, increases in the basic price are of importance in building up the yields obtained by the farmers from the manufacturing price of milk.
I hope that during the next few years we shall improve our performance in the manufacturing of dairy products, because that is where the scope for improvement lies. This is an area that had no chance at all with the operation of negative MCAs in the years before we came into office.


Now we are seeing an improvement in our share of the domestic market in butter and a similar improvement in cheese, but this is an area in which it will take several years to make real progress, to put in the capital investment and to obtain the necessary markets.
As regards the retention of the doorstep delivery service in this country, I believe that I speak for both sides of the House when I say that we consider this to be a very important priority, for social reasons, for employment reasons and certainly for the dairy industry. But we must face the fact that the one limitation upon the continuance of the doorstep delivery service would be the escalation of the costs of that service to such a degree that the market would no longer stand the price involved. That is why it is important to ensure that the income of the producers is in the coming years built more upon the income from the product side so that we can exercise for the consumer of liquid milk the restraint in the liquid milk price which will enable consumption to remain at its present level.

Mr. Stephen Ross: I fully support the right hon. Gentleman's views on the brief. Is it not the case that farmers could be encouraged by ADAS and others to produce lower quantities of milk with lesser inputs of feeding stuff and fertiliser—in other words, cheaper milk from lower-yielding cows? Is not that one way in which they could get a bigger profit?

Mr. Walker: ADAS, as the hon. Gentleman knows, gives advice in this sphere and I think that a number of dairy producers increased their input costs to such a degree that it became a less viable proposition. It depends, however, on the nature of the farm and of the capital investment and a whole range of other criteria. But as a general approach I think it is an area in which, on the best technical advice available, each farmer has to be left to make his own decision.
I turn now to the question of the levies suggested by the Commission in its proposals. On the basic co-responsibility levies, we generally hold the view that it is better to keep down the price than to increase the basic co-responsibility levy. On any of these levies we totally oppose any suggestion which will result in discrimination against the United Kingdom dairy producer.
One such suggestion is that there should be an increase in the basic levy on farms which deliver more than 15,000 kilograms per hectare, and that would mean that a percentage of the most efficient British dairy producers would be penalised by that increased levy. It would also mean that in most other countries virtually no producers would be penalised by the levy.

Mr. Anthony Nelson: Would it not also result in the paradox that many of those dairy farmers who had been in receipt of grants recently to expand their production would find that the feasibility of those schemes, which rests on a return which would be uninterrupted by a supplementary levy, would find themselves negated—a paradox which would be quite unacceptable?

Mr. Walker: I agree with my hon. Friend. The basic attitude of Europe in general to agriculture has been a desire to improve efficiency, and since that has been the case for some years it really would be monstrous if we

moved to a system of clobbering those who had been the most successful in becoming more efficient. Since, as a country, we are top of that league, I have no intention of accepting levies that discriminate in that way.

Mr. Nicholas Winterton: I think that this is a fascinating way to develop this debate. Could my right hon. Friend indicate which countries within the EEC support this super co-responsibility levy and on what grounds, bearing in mind that, as he quite rightly said, we are at the top of the league in dairy production and the EEC wants to see increased efficiency? How can this super levy possibly encourage farmers to increase their efficiency?

Mr. Walker: May I say something about the use of the expression "super levy"? What I am talking about is a proposal that where there is intensive use of land for dairy farming the basic levy should go up to a flat 6 per cent. instead of a flat 2 per cent. I believe that there is no argument for that at all, and, as I believe that and we are in a Council where there is a power of veto, there will not be any such levy. On the other levy there are differing views, and the National Farmers Union supports the Government's view that there is a case for a super levy by which those countries that continue to increase their production still further should pay on that further increase a levy equivalent to the cost of disposing of the surplus milk. My judgment is that in the present situation that levy would not be adverse to British agriculture and would be favourable to restraining the common agricultural policy. The National Farmers Union, in an official statement, has said that it, too, has come to that conclusion. But the countries which are continuing, some of them with national aid, substantially to increase their milk production are directly opposed to the levy. Therefore it is highly unlikely that it will succeed, although certainly a number of countries and the Commission will continue to press that argument.
In regard to the milk sector, with the continuation of the high rate of sterling it is important that our manufacturing side and the butter and cheese production side should be assisted by the continuation of the MCA system. We shall reject any co-responsibility levy that discriminates against the United Kingdom. We consider that price increases should be upon the basis of being substantially below the increase in input cost as a general restraint in this sector.
To turn to an associated sector, beef, in terms of British agriculture it is one of the most difficult areas and the one that has suffered most. The Commission has eradicated from its proposals the variable beef premium scheme. It is essential that that scheme should be reinstated. In terms of the United Kingdom, it is a scheme which is less expensive to the Community than intervention. It is comprehended by our farmers. It has been operated successfully. It was of immense importance to them during the period of depressed prices in this past year. Therefore, we shall be negotiating for that scheme to be reinstated.
The suckler cow subsidy, which was negotiated last year, is to continue, and we approve of that. There is a suggestion that there should be a special suckler cow subsidy for the Irish Republic. Indeed, it is suggested that there should be an overall package for the Irish Republic because of the very substantial drop in incomes that has been suffered there during the past year. I have sympathy with the position there, but it would be quite unacceptable for such a package to be proposed for the Irish Republic


and nothing for Northern Ireland. The drop in incomes in Northern Ireland has been even greater than that in the Irish Republic. Therefore, it is important that the Commission should recognise that if it comes, rightly or wrongly, to the conclusion that a particular region or country in Europe has suffered more during the past period and introduces a scheme to rectify that, it would not be acceptable unless such a scheme was extended to Northern Ireland because of its unique circumstances and many difficulties in agriculture.
Dealing with the other livestock sections, we are currently negotiating with the Commission changes in the clawback system for sheep in order to try to improve the export performance. Already we have succeeded in getting the Commission to drop the clawback for exports to third countries. We have got it to agree to increase substantially the range of animals upon which the premium was paid before the clawback. But in our view there are still matters connected with the clawback which are to the detriment of some European consumers as well as our producers and exporters and could be successfully altered. We are currently negotiating that.
We obviously want to continue with the variable premium scheme as agreed last year. We agree the type of revisions and the prices that the Commission is suggesting.
Turning to some of the other major items affecting the United Kingdom, the House will know that already we have negotiated a package which restrains the beet sugar.

Mr. Wm. Ross: The right hon. Gentleman will be aware of the peculiar problems of the operation of two different sheepmeat regimes in the island of Ireland. Is there any possibility of moving to a uniform system throughout the Community?

Mr. Walker: I do not think so. There is an option for any country. I do not believe any country would like to give up that option. If the rest of the Community would like to move to our system, I should be very happy to persuade them to do so, but I think it unlikely that they would. Certainly I am unwilling to move to their system. To have the option is right. We have freedom and if we wanted to move to the system in the Irish Republic we could do so, but I do not think it would be in the interests of British producers to do so. I recognise that real difficulties are created by the border.
On the question of sugar, which is a very important crop in the United Kingdom, we have negotiated lower quotas. Nevertheless, I think that they are sufficient for British agriculture and the British sugar beet industry. This has not been verified finally by the Italian Government, but probably, after the revaluation of the lira, Italy will find it possible to go ahead with the package previously negotiated. If we have that we shall have the continuity of a decent return from sugar beet production, which is of great value and one of the most important rotation crops for British agriculture.
On the various proposals for co-responsibility levies other than for milk, there is a need, whether we call it a co-responsibility levy or a limitation of expenditure, to look at other areas where there is clearly either an existing surplus or a position where production is nearing surplus. We have to look very carefully at the proposals on olive oil, processed fruit and vegetables and tobacco.
On the cereals front, we have to make sure that we do not move to a position of expensive surpluses whilst

safeguarding very carefully the cereal supplies of Europe. It would be wrong to have too great a surplus but nowhere near as wrong as to have a shortage of cereals in Europe. We have to get the balance right. In these negotiations we are willing to consider carefully the arrangements that should be made.
There is also a Council commitment to apply co-responsibility to wine by strengthening the early season distillation arrangements to remove low quality wine from the market. Looking at the potentiality of wine production in Europe, that is a sensible move, which again we would want to study while endeavouring to have appropriate arrangements.
In terms of the overall cost of the package, it is difficult for the Commission or for anybody else to project accurately the trends of costs in agriculture. If world sugar production fell, due perhaps to weather conditions or crop failure, dramatic changes could take place in the European budget. If the Soviet crop in any one year were successful, although I am beginning to doubt whether that will ever happen, it could have a dramatic impact on the common agricultural budget. We would want to ensure that the growth of the guaranteed expenditure in 1982, taking account of the revised price proposals, was markedly less than the rate of growth of the own resources base. Within that limitation we can continue to see agriculture operating in a prosperous way throughout Europe.
I come now to the price negotiations which will take place next week. Obviously they will be complicated and difficult. So far the rounds of discussion have shown considerable disagreement on a whole range of items. It is important for the farming community as a whole that we should endeavour to come to a sensible conclusion as speedily as possible. Uncertainty is bad, but we could not come to a speedy agreement unless some of the basic matters which I have mentioned today were agreed as part of the package.
In the period in which the United Kingdom takes the Presidency, in the second half of this year, if the main price fixing difficulties have been settled and are out of the way and there is no great difficulty on any particular regime, which might be the case by the second half of the year, I would hope that the Council of Ministers could pay attention to the importance of trying to develop some longer term policies instead of the year-by-year policies, particularly for the major items which are in surplus, such as milk. In farming it is possible to shift production rationally and to make changes in the structure only if it is done over a period; we should not attempt to do it suddenly, with all the discontent and considerable damage to the economic and social fabric that that would create.
In regard to United Kingdom agriculture during the past year, whether it is benefiting from positive MCAs, benefiting from the closer relationship that we are establishing with our retailers, benefiting from the successful campaigns to buy British in major supermarkets, or taking part in the major dialogue that the five marketeers whom I appointed have engaged in round the industry, I am pleased that during this period there has been a considerable increase in attention to marketing.
Britain has possibly one of the finest, if not the finest, agriculture systems in the world. It has a record of investment, innovation and good labour relations which, if copied by the rest of British industry, would have made Britain the post-war success of all times. Moreover, it is


an industry which, in its closer links with retailers, manufacturers and processors, creates the foundation for an important part of our future economy.
The French Government have decided that their role in the 1980s is that of the great food provider for Europe, and possibly the world, for agricultural, manufacturing and processing products. Britain should not just stand aside and watch with interest. We should recognise that France has identified an important area of economic growth. We already have good manufacturing and processing industries, as well as a good farming structure, and we should therefore ensure that, by better marketing and more investment, the 1980s is the decade in which our agriculture and our food industries obtain bigger shares of the markets at home and abroad.

Mr. Roy Mason: I beg to move, to leave out from "exist" to the end of the Question and to add instead thereof:
and stresses the need to hold down prices on those products in structural surplus and to submit proposals on common agricultural policy reform which will be designed to reduce the costs of the common agricultural policy which will take account of the interests of food processors and consumers.
The House will remember that a year ago, when we debated the 1980–81 agriculture price proposals, I drew attention to the growing disillusionment within the national States, and not only the United Kingdom, about the worsening image of the European Economic Community. During the past year that image has been besmirched even further. There have been arguments about the budget, who pays and who benefits, and squabbles at the summit last year and at Maastricht this year. Nearly all the Member nations were in conflict last year about fishing policy—the Germans, the Danes, the Dutch, the French and the British.
Within agriculture, the depression in incomes is causing widespread concern and the common agriculture policy is again under attack. The operation of high positive MCAs by Germany and Britain is also an irritant.
What is most deplorable—I say this more in sorrow than in anger—is that Common Market sales of subsidised butter and butter oil to the Soviet Union increased by 60 per cent. last year, in spite of a clear commitment to hold down sales in support of the food trade embargo—an extra 90,000 tonnes, using back-door techniques and, it is suggested, using Third world countries to get it into Russia. That revelation has to be taken with the recent report that, at home, Eton College received subsidised butter at half price—40p for a 250g pack. How can that be defended when we have nearly 130,000 tonnes in stock? Our pensioners and unemployed people with large families pay the Common Market price which the right hon. Gentleman negotiated. We pay a subsidised price, but even that is causing falling consumption at home. What a farce that Moscow and Eton come before our pensioner and unemployed. It is no wonder that the Common Market is criticised so much and so often.
It is possible that this will be the constant nature of the beast. Perhaps we shall have to live with this continuous conflict, with a periodic scarring of the face of the Community caused by its own members and, worse still, showing that face to the rest of the world. I hope not. I do

not share that view. This year's agriculture price proposals, and particularly the paper reflecting on the CAP policy, shows that the Commission is of the same mind.
Mr. Gundelach's last act was to have a retrospective analysis prepared to encourage changes in the CAP that would introduce fresh ideas into the annual review and be a forerunner to the major study of CAP reform called for by the Council of Ministers on 30 May 1980, and to be ready for ministerial discussion by the end of June. This will be the first major opportunity for a British input into the make-up of the CAP, occurring, coincidentally, at the same time as the enlargement of the Community.
With the entry of Greece, then Spain and Portugal, there will be quite a transformation. The population will increase by 20 per cent. The agriculture work force will double. Indeed, there will be a 50 per cent. increase in the Community's fishing fleet. In view of the type of agriculture that the Common Market will have to absorb, particularly that of the Mediterranean countries, I hope that we shall not go through another phase of agriculture policies operating against us, as has happened since the accession, because of the structural difference between our farming and that of our Continental neighbours. This time, therefore, and this year, there must be a serious reform of the CAP.
In that context, the Gundelach paper is most honest and revealing. It criticises the open-ended or open-handed guarantees to increase production. It criticises the fact that there is no control over output. It criticises the surpluses that are created and the resultant dumping at subsidised rates on the Third world markets. It registers concern that the support arrangements of the CAP have unduly benefited the larger producers. Indeed, experience has shown that because of national social reasons and periodic political interference by member States national subsidies have been given, particularly blatantly in the case of France.
Most worrying and noticeable is the admission that the operations of the CAP have widened and not reduced the gap between the richer and the poorer nations of the Community, and that those differences increased during the 1970s. Generally, the richer Community regions produced cereals, milk and sugar, and received more financial support than areas producing fruit, vegetables and wine. The report says that not enough attention has been paid to areas with economic and natural handicaps. No doubt that will be a major issue in recasting the CAP when the three Mediterranean countries are fully involved.
One final criticism that the report makes of the CAP is about the disproportionately large share of the common agricultural policy budget—over 70 per cent.—and the tendency to retard the development of other common policies. The report says that it is well known that the Community's expenditure is now approaching the limit of its resources in their present form, and the CAP must take account of that.
The Government reaction to the Commission's reflections on the CAP has been to give them a qualified welcome. They agree that the Community can no longer afford open-ended guarantees for agricultural production at their present levels. If the extension of co-responsibility is agreed—that is, the principle of producer financial coresponsibility—and if the measure is intended effectively to cut the budgetary cost of the CAP and help to correct the imbalance of supply and demand, that, too, would receive the Government's support.
The Government have now stated their position. They oppose the creation of structural surpluses. They say that they will not favour any measures designed to discriminate against larger producers by reducing their unit returns. From the point of view of the United Kingdom, with its larger, efficient units, that is a logical view to take. However, the Government must be held to their proclaimed view, and the unanimous declaration of this House which, on 20 March last year, stated that the Government's intention is to
seek an agreement which is aimed at reducing the production of surpluses and the cost of the common agricultural policy".—[Official Report, 20 March 1980; Vol. 981, c. 651.]
That must be a continuing commitment.
I turn to the price review. Some of the irritants which might bedevil the negotiations are—subject to Italy's agreement, if it gets its sugar quota—being removed. Some credit must go to the Minister for that. The butter quota for New Zealand is agreed for the next two years. The sugar quotas for the Common Market poducers are settled for the next five years. However, I fear that the sugar mountain will be recreated in that time.
Extra financial assistance is to be given to the farming communities in Northern Ireland and the Western Isles of Scotland. The Minister must constantly bear in mind the plight of Northern Ireland farmers. They have never benefited as much as their southern neighbours. The Minister must strive for more benefits for Northern Ireland farmers.
There must be a recognition of the farmers' plight in the main negotiations. Manufacturing industry in the United Kingdom is already going bankrupt. Farmers are in great difficulties. Many are involved in misery, borrowing from the banks just to live.
In recent years inflation, rising oil prices and the increasing costs of machinery, fertilisers and cereals have been made much worse by high interest charges. That combination of factors is hitting farmers hard. Price rises are inevitable. It is right to save the biggest and most basic industry in the United Kingdom. The question is: at what level should it operate?
Throughout the Common Market food prices have risen less than the average inflation rate. That is not generally appreciated by critics of the Common Market but it is essential that that should remain so. It is also essential that the Common Market budget should be kept under restraint.
The National Farmers Union and the European farmers union, COPA, want a 15·3 per cent. increase in average prices. The Commission recommends 7·8 per cent. It resembles old-fashioned collective trade union bargaining. The employer wants the minimum and the employee the maximum. In this case the Commission is fighting the farmers and the Agriculture Council is the haggling arbitrator. The problem of this year's package of proposals for Common Market prices was described in The Times recently as
an ingenious attempt to reconcile two essentially conflicting objectives.
The conflicting objectives are the demand by the farmers for a considerable rise in prices to offset a Community-wide fall in real incomes and the need to restrict Community spending on agriculture to avoid the possibility of the Community going bankrupt and to release a greater proportion of the Community budget for

non-agricultural spending such as on the regional and social funds. That the conflict has to be resolved is undeniable. Whether the proposed package or, more important, the final settlement, will resolve the conflict, is doubtful.

Mr. Hugh Dykes: Does the right hon. Gentleman therefore suggest that the European Parliament proposal for a compromise 12 per cent. increase is appropriate?

Mr. Mason: No. That is too broad a generalisation. How would a 12 per cent. increase affect butter, sugar, milk, beef and veal? One must consider all the items. That is why it is not possible, even in the debates prior to the package being determined, to go into detail. Many prices will change. Everybody knows that the 7·8 per cent. increase will not be accepted. On previous occasions the prices have risen, but we do not know to what extent they will rise this time. It is interesting that the Agriculture Committee of the European Parliament denounced the 7·8 per cent. and called for a much higher figure.

Mr. Colin Shepherd: The right hon. Gentleman has expressed concern about the depression of incomes in the farming industry. Is he aware that the farming industry is anxious to know where the Labour Party stands on incomes for next year? Will he enlarge on his attitude to MCAs?

Mr. Mason: I shall deal with MCAs when I deal with the green pound and the revaluation of the MCAs. I do not duck that issue. Because we do not know what the average price rises will be—we know that they will not be as low as 7·8 per cent.—it is not possible to put a figure on the revaluation of MCAs.
The major elements of the package are price increases ranging from 4 per cent. to 12 per cent. for the various products, with an overall average increase of 7·8 per cent.; a strengthening and extension to a wider range of products in the co-responsibility system; and the proposal to phase out green currencies with Britain being asked initially to revalue the green pound by 5 per cent.
The Commission estimates that the package will raise consumer prices in Britain by more than 2½ per cent. That will be offset to a certain extent by the proposed 5 per cent. green pound revaluation. Commission proposals have a reputation for being rejected by the Council of Agriculture Ministers, almost on principle. There is no reason to believe that this package will be treated differently. Early sounding of the Ministers suggest that the final average price increases will be much higher than the proposed 7·8 per cent.
The most striking aspect of the proposed price increases is that there will be increases in the price of products in structural surplus. It would be folly to encourage still further increased production of goods with which the markets in the Community are saturated and for which the only outlet is dumping on the volatile world markets. The recent but temporary upturn in the world price of sugar has given the Community a short respite and eased the immediate threats of bankruptcy, but the long-term view, with the fear of sugar mountains, is not encouraging.

Mr. Robin Maxwell-Hyslop: Does the right hon. Gentleman apply the same argument to coal? Does he think that there should be no increase in the price of coal while that is in surplus?

Mr. Mason: Is the hon. Gentleman referring to the coal mountains in Britain?

Mr. Maxwell-Hyslop: Yes. I asked the right hon. Gentleman a straight question and I want a straight answer.

Mr. Mason: Is the hon. Getleman unaware that coal mountains are paid for by the consumer and the Coal Board, which stocks the coal? The complaint about stocking coal is that we have to pay for it ourselves when it is subsidised in Community countries. That is the unfair competition. We are paying for the stocking but we do not have the benefit of subsidies on stocking as do our European counterparts. It is not a fair analogy.
The Community is aware of the damage that has already been done to its heavily tarnished image. The Community has sought to improve its standing by reducing the scandalous size of the food mountains. In the recent past it has made great efforts to cut back surplus stocks. Yet, in spite of its efforts, at the end of last year the Community still had massive stocks of surplus produce. It had 268,000 tonnes of beef, 141,000 tonnes of butter, 232,000 tonnes of skimmed milk powder, 5 million tonnes of wheat, 1,100,000 tonnes of barley and 500,000 tonnes of rye.
I recognise that there is always the possibility of producing surpluses of products in the Community. Would it not be wiser for the Community to reduce the real level of intervention prices so that they cease to act as guarateed wholesale prices for all that a farmer is able to produce? We have demanded that the prices of products in surplus should be frozen until the structural problems are eliminated. During last year's review the Minister supported the Labour Party's policy of a price freeze on products in surplus. The structural problem is not less severe this year, and we are concerned that the Minister is likely to go for a higher price than even that which the Commission is recommending.
The success of the Commission's package is dependent on its ability to persuade the 10 Agriculture Ministers to accept the co-responsibility proposals. The Commissioner, in explaining the proposals, stated:
If output exceeds certain quantities, the producers are subject to share the financial burden of disposal of these surpluses.
There are a number of variants. However, the differing rates for A, B and C sugar quotas did not restrict production and were an extra burden on the taxpayer and the CAP budget.
The Commission has proposed a continuance of the 2 per cent. flat rate tax on dairy production with a new super tax of 30 per cent. on production that exceeds the average of the previous two years. Co-responsibility is to be extended to other sectors. There will be a 1 per cent. tax on each 1 per cent. of cereal production over fixed ceiling up to a maximum tax of 5 per cent. Co-responsibility is to be introduced to beef and veal by restricting intervention to certain types of animal and to certain times of the year. It is also proposed to extend co-responsibility to tobacco, olive oil and fruit and vegetables.
Co-responsibility has operated in the sugar sector for some time through different prices for various quotas. That should be proof enough that it is not a solution to the CAP structural problems or to the Common Market's budgetary mess. What a mare's nest. The major wrangle over all these proposals is likely to delay the review. We must stress, however, that any co-responsibility measure must have as its main objectives a cut in the budgetary cost of

the CAP and a correction of the imbalances between supply and demand. That means that it does not operate on the basis of price increases alone.
Positive MCAs, especially of 14 to 18 per cent., are taxing our food imports and causing the food price index to be about 3 per cent. higher than necessary for most families.

Mr. David Myles: What is the level of positive MCAs now, bearing in mind the recent change in currency rates in Europe?

Mr. Mason: In the next 24 hours the positive MCA of the United Kingdom will be falling further while those of some other European countries will be rising. This might be of benefit to the Minister when he considers revaluation. However, it will not be to the benefit of farmers. The other member States that have negative MCAs may be able to use the change in currency rates and its effect on the green pound as an argument for further devaluation, and thus help their farmers.
High positive MCAs of 14 to 18 per cent. are having an effect on our food imports. They are causing the food price index to be about 3 per cent. higher than necessary for most families and are swelling the Community budget. The positive MCA acts as a supplementary levy on food imports from third countries alongside the ordinary import levies, both of which are paid into the Common Market budget as part of our own resources.
In intra-Community trade the positive MCAs are collected by Customs and Excise and paid into the intervention board to defray the cost of operating the CAP in the United Kingdom. That means that our receipts suffer. The adverse effect of positive MCAs is partly to increase the United Kingdom's gross contribution to the budget and partly to reduce our receipts.
We have, therefore, eased the problem of the Common Market and enabled it to avoid hitting its budget ceiling. We have slowed down the urgency and drive for CAP reform. Over the period of positive MCAs we have forced our consumer to pay higher food prices. We have undermined the budgetary deal that the Prime Minister achieved and we have helped to fuel inflation at home.
One can argue whether there is a dear food policy and whether that benefits the farmers. However, the farmers could have benefited, with an 18 per cent. positive MCA, by up to £500 million in one year.
I do not think that the Minister will be able to resist the pressure for a percentage revaluation if average prices rise in the review much beyond 7·8 per cent. I noted that the right hon. Gentleman said, in terms of the present proposals, that he would not agree to a massive revaluation. How are we to strike a balance? I have always suspected that the Minister has resisted demands for revaluation to enable him to use that resistance as a bargaining counter in negotiations. I recognise that the 6 per cent. devaluation of the Italian lira and the currency adjustments that have coincided with it may have eased the right hon. Gentleman's revaluation problems. Those factors have had a subsequent effect on European currency units and on positive and negative MCAs.
The United Kingdom MCA could fall by about another 2 per cent. In the past three weeks we could well have seen it fall from 18 per cent. to 12 per cent. The Minister might rightly say that the Commission already has what it


wanted. We must wait to see whether prices rise by 7·8 per cent. on average and whether there are further demands made for revaluation.
One factor that flows from the devaluation of the lira and the currency adjustments is that some countries will have an increase in their negative MCAs. They will have the opportunity to devalue and to give their farmers added benefit. That may curb some of the wrangling over price increases. That is why the press is commenting that it believes that the Minister and the Council may be able to make quicker progress on price proposals this year than in the past.
We want the Minister to take into account the fact that the problems of the farming industry that are caused by the present economic climate and his Government's policies should not be solved at the cost of long-term consumer interests and the interests of the whole community. If major price rises are agreed—no doubt they will be higher than 7·8 per cent.—and if there is no revaluation, the United Kingdom's consumers will bear the full cost of the increase.
It is not only the Opposition who call for some revaluation, for the Minister to take notice of consumer request and for him to take a consumer interest. United Kingdom consumers call for it, as do European consumers, the Agriculture Committee of the European Parliament, the Food Manufacturers' Federation, the food and drinks industries, the United Kingdom Provisions Trade Federation and the Canned and Preserved Food Importers and Distributors. There might be something in it for those organisations but, after all that clamour, if there were a revaluation we should expect to see it reflected in food prices at home.

Mr. Peter Walker: Basically the right hon. Gentleman makes a strong attack on positive MCAs. However, I am still not clear about his position. Is he saying that with the current proposal of a 7·8 per cent. increase the Opposition would be opposed to any revaluation of the green pound?

Mr. Mason: I have made my position clear enough. I am asking the right hon. Gentleman to bear the consumer in mind and to have regard to his views when he goes to Europe. I have said that we consider that the green pound should be revalued to reduce prices to the consumer and to boost consumption at home, which would help the farmers too.

Mr. Peter Walker: rose——

Mr. Mason: I know that the Minister argues against that proposition, but we believe that consumers should get some benefit. We have had an 18 per cent. positive MCA and there is no doubt that consumers have suffered. The right hon. Gentleman has always argued that the benefit would not be passed on and that it would be taken through increased profits by the companies that were importing. The simple answer to that is that we should let in trade and see what happens.

Mr. Peter Walker: The right hon. Gentleman's Government tried, and had negative MCAs. The price of food rose twice as fast as it has done under this Government. With the 7·8 per cent. increase in prices, is the right hon. Gentleman in favour or against the revaluation of the green pound? The farmers in this country want to know.

Mr. Mason: I spelt out our position and the right hon. Gentleman understands it full well. He has never had the consumer in mind during his two years as Minister of Agriculture, Fisheries and Food. Throughout his term he has devalued, moved to positive MCAs and considerably helped the farmers at the expense of the consumer. We cannot put a figure on a revaluation because we do not know what average price rise will come out of the review. The right hon. Gentleman knows that too. Although he has resisted revaluation of the MCAs he has always said that it would not be passed on. He has the chance to prove it. Let us put all the people to the test. The right hon. Gentleman has the opportunity, let him do so.
The Commission's package is wholly unacceptable as a reform of the CAP. It does nothing to solve the underlying problems of the CAP. Its acceptance might disguise the need for fundamental reform. It might delay us in getting on with the inevitable. This year there must be some fundamental reform of the CAP. Far from easing the Community's budget problems, it might induce more severe problems. It does nothing to ease the current plight of British farmers or to solve the underlying problems of the CAP, because it leaves the solution of structural surpluses with its ill-conceived co-responsibility policy. At the same time, it goes back on its policy of the last two years by sanctioning price rises for those products in structural surplus. The package does nothing to shift the balance between northern and southern products. It does not tackle any of the many problems of the CAP, as the Gundelach papers suggested.
As a result of the Tories' general economic policies, Britain's farmers suffered a massive drop in real income of over 20 per cent. last year despite agricultural production rising to its highest level. The inflated value of sterling caused the price of many inputs to rise disproportionately, while high interest rates added an increased burden.
The recent Budget did nothing for the industry. While the cuts in MLR might help the industry to the tune of about £50 million annually, the increase in petrol tax will be crippling. Farmers, farm workers and rural communities will be badly hit by the 20p a gallon increase in petrol duty and the increased road fund licence. All the organisations serving agriculture, including road haulage to and from the farm, will be affected. Higher costs will be passed on to the farmers.
The National Farmers Union may spend time trying to persuade the Prime Minister and the Minister of Agriculture, Fisheries and Food to get the Council to agree to higher Common Market prices. They should instead be urging the Government more strongly to rethink their general economic policies and to bring down the rate of exchange to a more realistic level. They should he urged further to reduce interest rates and increase public expenditure, especially in rural areas, and they should be urged to take measures to reduce unemployment.
It is only in the context of a revitalised economy that Britain's agriculture industry will be pulled from its slump. This year's review will not solve the industry's problems. It will necessitate a major change in Government policy. Therefore, the NFU should use its massive lobby to change those tight economic policies, because the palliatives of price review will not stop the rot.

Mr. Peter Mills: For once in my life, I am almost speechless. Over many years I have listened to agriculture debates. I may not hear many more. However, the speech made by the Shadow Minister, the right hon. Member for Barnsley (Mr. Mason), takes the biscuit. It was extraordinary that he never faced the facts and the difficulties of British agriculture and the consumer and of being in the Community. That was where he utterly failed. His speech was an extraordinary attempt to wriggle and not to face facts. Many people want to know exactly what is the view of the official Opposition in these difficult circumstances. We have not heard it. The right hon. Gentleman was bowled out middle stump by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). It was a beautiful ball, and there was no answer from the right hon. Gentleman.
British agriculture is in a difficult position. The price review is crucial for it, and therefore for the consumer, for the processor and for all who work in agriculture and its food industry. The figures point to a serious position, although, to be fair and honest, it must be said that many farmers are still doing reasonably well, particularly those who are growing cereals and who do not have a heavy burden of large overdrafts, and so on.
Inputs have increased sharply. Some are due to worldwide factors beyond the control of the Government. However, there are some areas in which the Government could help. I refer particularly to the increase in fuel costs and petrol. It is not always possible to recoup everything from a price review. We must carefully consider the input and Government policy on those matters.
Unless recoupment starts, production will continue to fall. I can envisage the time when in some areas, such as in Scotland and some of the poorer areas of farming in Wales and in the South-West, many fanners will go back to the dog-and-stick era. That is not good in the long run and it is certainly not good for the country as a whole. It will be of no benefit to the housewife.
Perhaps later the Opposition will give a clearer picture of what they would advise or encourage the Government to do. What would they do about revaluation? A marvellous smoke screen was put up, with phrases like "We do not know this" and "That might happen". We should like to know whether the Opposition would revalue. We should like to know about end prices, which are crucial.

Mr. Maxwell-Hyslop: The right hon. Member for Barnsley (Mr. Mason), only a few weeks ago at Question Time, pressed for a 5 per cent. revaluation. Unless he disowns that request we are entitled to assume that he still stands for 5 per cent. revaluation.

Mr. Mills: I was hoping that the right hon. Gentleman would make his position clear. Farmers would like to know.

Mr. Douglas Hogg: My hon. Friend is right in saying that the right hon. Member for Barnsley (Mr. Mason) has put down a smokescreen over revaluation, but he stated clearly that he would freeze institutional prices for products in structural surplus, which include cereals and milk.

Mr. Mills: Exactly. That was one clear fact that emerged from his speech. It would mean no increase in the

price of milk or cereals—and I hope that all dairy farmers are listening. Workers in the milk plants in the South-West will be interested to know that the Labour Party does not want a reasonable increase in milk prices to cover increased costs, which will result in more people being laid off and less milk. I can foresee a great movement from the Labour Party to other parties in my part of the world.

Mr. Hogg: Where are the other Opposition parties?

Mr. Mills: I shall come to that.

Mr. Mason: I have never in my life heard anything so pathetic. Get on with the debate.

Mr. Mills: We have exposed the nonsense of Labour policies on agriculture. My right hon. Friend is keen to have advice and help and to have the House behind him. It would be interesting to know the Liberals' view.

Mr. Hogg: Where are they?

Mr. Mills: Where are the Social Democrats? Will the Lib-Lab pact continue? Does agriculture not mean anything to those parties?

Mr. Colin Shepherd: It would be easier to find out if the Liberals or Social Democrats were present.

Mr. Mills: That is right. We wait with bated breath to hear what the Lib-Lab pact will produce for British agriculture. The new party shows a lack of interest by its absence.
Turning to the price review, I should like to see nothing less than 10 per cent. or perhaps 11 per cent. overall increase and certainly no revaluation of the green pound. The beef premium and the butter subsidy should continue. School milk aid should be increased. Only the super co-responsibility proposals are suitable. They would be to our benefit and would penalise countries producing excess milk.

Mr. Mason: It would mean a 5 per cent. increase in food prices.

Mr. Mills: What I have said is in the interests of British agriculture, the consumer and the country. We have not had similar suggestions from the Opposition.
My right hon. Friend is right to place emphasis on end prices in the livestock sector. A serious imbalance is developing in British agriculture. Less and less stock is being produced and more and more cereals. We are almost dividing the nation into those who grow cereals, which are still fairly profitable, and those who seek to produce livestock, which is not so profitable. I back my right hon. Friend's desire to correct the imbalance.

Mr. Stanley Newens: The House has considerable respect for the hon. Gentleman's knowledge, but he is making a cheap, knockabout speech. Does he not recognise the responsibility that he and his colleagues have for the difficulties, because they voted for entry to the EEC and for acceptance of the CAP. What right does he have to attack people who have consistently opposed the policies and who have been proved right?

Mr. Mills: I have heard that gramophone record many times. It is a bit cracked.
The package deal that the Irish Government are seeking would be unfair to Northern Ireland. I hope that my right hon. Friend will watch it closely. If a special package for beef producers comes about, Northern Ireland must be included.
National aids are a major problem. France's cheating is doing untold damage to the Community and its agricultural policies. I hope that my right hon. Friend will continue vigorously to try to put a stop to them. In the Conservative Back Bench committee on agriculture we yesterday listened to the French representative's arguments. He made it clear that France would continue to support its agriculture, just as we support British Leyland and other industries. However, the difference is that nearly all agricultural products are paid for, which is not so with kettles, wheels, cars, and so on. National aids are severely distorting and upsetting the CAP.
British agriculture has a problem with bank commitments and overdrafts. I understand why interest rates have been high, but my right hon. Friend must carefully consider agricultural credit, which would not take too much time and energy. Farmers' indebtedness to banks has risen alarmingly. A review might help, particularly in considering whether we should change to subsidised interest rates instead of capital grants.

Mr. Dykes: Does my hon. Friend agree that many senior bankers consider that interest rates should be even lower?

Mr. Mills: That would be extremely helpful to farming interests.
Because of the cost of supporting the sheepmeat regime, the Community may have a large bill to find. Unless there is an adjustment in clawback, the cost to the Community in supporting the deficiency payment system will be enormous. That matter must be vigorously pursued. I wish my right hon. Friend all the very best in seeking a small reduction in the clawback when we export our lamb to the Community.
This has been an interesting debate, in that we have heard clearly what my right hon. Friend intends to do and the policies that he wishes to see pursued. In my own small way I have made clear where I stand with regard to the price review. Regrettably, we have had no statement from the Opposition to take back to our constituents to tell them that that is what they would do if they were in power. I am glad that a Liberal Member has returned to the Chamber. I believe that men are searching up and down the Corridors of the House to find a Social Democrat to give a view on agriculture, but that may take a long time.
This is an important debate. Many farmers are watching and waiting, and wanting to know. I wish my right hon. Friend every success in the negotiations in Brussels.

Mr. Douglas Jay: I am always glad to agree with the hon. Member for Devon, West (Mr. Mills), having been a habitué of West Devon even before he was.

Mr. Peter Mills: Oh, no.

Mr. Jay: As I knew the area well in 1912 and 1913, I think that what I say is probably correct.

Mr. Peter Mills: I apologise to the right hon. Gentleman. I was not there then.

Mr. Jay: I rather suspected that the hon. Gentleman was not. There is no need for him to apologise, however, as I was about to assure him that I entirely agree with what he said about both the Social Democrats and the French.
The hon. Gentleman and his hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) referred to coal. Some

people might welcome it if the EEC Commission were willing to buy all the coal produced by the NCB at a high price, whether or not any consumer required it, and if, in addition, the Germans were prevented from buying Polish coal at a price lower than that laid down by the EEC Commission.
More seriously, however, I welcome what the Minister of Agriculture, Fisheries and Food said today about British farming. Such criticisms as I have are not of British agriculture but of the CAP. I prefer not to get tied up with green pounds, MCAs and the rest of these crazy short-term devices, but to stand back a little and direct attention to the cost that the CAP is now inflicting upon the British economy, as compared with our previous system of deficiency payments.
The EEC Commission now proposes still further price increases, averaging between 6 per cent. and 12 per cent. Whether one agrees with it or not, it seems that the principle of no further price increases for commodities in structural surplus, which was promised to us, has now been abandoned not merely by the Commission but by the Minister and the British Government. But that principle was about the only morsel of reform in the CAP that was repeatedly promised to the British public.
A rise of 6 per cent., 9 per cent. or 12 per cent. in food prices may not sound much, but it comes on top of the large excesses in EEC prices of some 50 per cent. to 300 per cent. over world prices. That amount is added to what the British consumer would have to pay if we were supporting agriculture by deficiency payments rather than by the present extreme form of agricultural protectionism.
The EEC Commission's own report on agriculture last year has not been quoted by the Minister. It contains the latest, extremely revealing figures on the excess of EEC food prices over the world prices for 1979–80. It shows that EEC wheat prices averaged 63 per cent. above world prices, and that barley was 61 per cent., maize 90 per cent., sugar 31 per cent., beef and veal 104 per cent.., and butter 311 per cent. above world prices. Those are the EEC Commission's own figures. They are the background against which we should judge some of the changes this year and last year and those now proposed. It is not much comfort to be told that prices will rise by only 3 per cent., 4 per cent. or 6 per cent. if they are already 100 per cent. higher than the prices that one would pay if we were able to buy freely on world markets.
It is sometimes said that food prices would not be lowered by percentages anything like those if this country were outside the CAP and the Common Market and returned to a deficiency payments system, because, it is said, our demand on supplies in the non-EEC world would tend to raise world prices. That is a pure delusion. If the United Kingdom bought more food from non-EEC countries it would buy approximately the same amount less from the EEC. The EEC surplus, which would be greater to the same extent, would have to be sold on the world market, thus depressing world prices. There is therefore no sound reason to expect that world prices would be substantially different.

Mr. Douglas Hogg: Perhaps the right hon. Gentleman will help me on this matter. I have listened to his argument with considerable interest. If we were exposed to world prices in the way that he suggests, and if the figures that he quoted are correct, the British farmer could not compete


at all and would be unable to market any of his products. If that is so, would not withdrawal from the Common Market be wholly disastrous for British agriculture?

Mr. Jay: Surely the hon. Gentleman understands that the farmer would receive a deficiency payment which would raise his returns from the level of world prices to whatever guaranteed price the British Government chose to select. The hon. Gentleman speaks as though he has never heard of that system.

Mr. Hogg: I am very glad to hear the right hon. Member make that point. It suggests that the cost of deficiency payments to the British Treasury would be astronomical.

Mr. Jay: Not at all. The hon. Gentleman seems unaware of two things. Deficiency payments would relate only to food produced in the United Kingdom. They would not raise the price of all the food bought by the British consumer. [Interruption.] If the hon. Gentleman persists in asking questions, I must ask him at least to listen to the answers. Secondly, he appears to be unaware that deficiency payments are not paid across the exchanges, so there is no balance of payments cost.
Last summer, in a written answer, the Minister himself estimated the extra amount that the British public at the retail stage now have to pay for food as a result of our importing food at EEC prices rather than at world prices. He put the figure at about £3,000 million per year. That is about 20 per cent. of this country's total expenditure on food at the retail stage before the increase. As that applies to all foods, the increase as a percentage of CAP food prices must be greater. I judge that to be a fair estimate. It is not surprising, as the levies now being imposed on imports represent a tax of 100 per cent. or more on certain commodities.

Mr. Dykes: Is the right hon. Gentleman not in danger of misleading the House, at least slightly? That official answer was based only on the assumption that the foodstuffs would be alternatively available at world food prices. However, that was not conceded as a reality. As the right hon. Gentleman and other hon. Members know, the amount of foodstuffs available at the world market price is small. Most of those foodstuffs are based on long-term contract arrangements or medium-term contract arrangements at much higher prices. Should not the right hon. Gentleman make that point clear before misleading the House?

Mr. Jay: I have just explained to the hon. Member for Grantham (Mr. Hogg) why that is not true; the hon. Member for Harrow, East (Mr. Dykes) cannot have been listening to the point that I made.
In the past year, farmers' costs have risen in money terms. If agriculture is to continue, farmers must be compensated for that either by deficiency payments or in some other way. That is not in dispute.

Mr. Dykes: rose——

Mr. Jay: But we are not so often told that the increase in farmers' costs is largely due to EEC levies on feeding stuffs—notably maize and barley—which are imposed by the EEC itself. Under the deficiency payments system, the British farmer could buy barley and maize at the world price. According to the Commission, he now pays 61 per

cent. more for barley and 90 per cent. more for maize, which are two of the most important feeding stuffs used by British agriculture.
According to document 5091/81, that is what the Commission calls, in Euro-jargon,
a fresh spiralling of input prices".
In plain English, that means a further rise in the EEC price of maize and barley.
Not content with that, in its earlier document 12271/80—the so-called "reflections"—the Commission proposed a reform in the CAP by calling for
more controls over imports of certain animal feeding stuffs".
It is thoroughly characteristic of the Commission's attitude that in the guise of a solution it should propose a further turn of the screw of agricultural protectionism, which is bound to make things worse by making feeding stuffs even more expensive for the British farmer. Again in plain English, it of course proposes this, because the French produce a great deal of maize, whereas we do not.
The hon. Member for Devon, West mentioned the French. I should like to quote an almost comically revealing sentence from Commission document 12271/80:
Would France have agreed to high prices for cereals and sugar if it had had to meet the expenditure itself? The answer is clearly 'No.
I heartily agree. It is a revealing comment.
I can also quote a fine example of the effect of these high grain prices on my own constituency. Up to three months ago, Messrs. Gartons employed 600 workers who manufactured starch and glucose—the Minister referred earlier to our wonderful food industries—out of maize, which for more than 50 years had been imported direct at the world price from the United States. As one of the blessings of Common Market membership, the EEC imposed a 100 per cent. import tax on maize. After a considerable struggle, production at Gartons became uneconomic, and the plant was closed down last December, throwing another 600 people out of work.
Inevitably, as a result of these policies, prices are to increase further all along the line. I notice that maize and barley are scheduled to rise further by about 6 per cent. or 9 per cent. this year. Next year we shall be told that other food prices must rise further because the cost of feeding stuffs has risen. That will go on as long as this system continues. Costs will always rise and will never come down. Indeed, the one thing which no one in Brussels ever suggests—it would be almost blasphemy—is that the price of anything should be reduced.
That is why what we have come to miscall "surpluses" have come into existence. Even now, we have a mountain of United Kingdom-produced grain of several hundred thousand tonnes stored in airfield hangars and elsewhere. It consists of wheat and barley that is too dear for consumers or farmers to buy.
Of course, those surpluses are not real surpluses, in the sense of being surplus to what people would like to consume if they could. We are not really producing too much milk in the world. They are artificial surpluses caused by the fact that the price is too high and consumers cannot afford to buy them, unless they happen to be the Soviet Government, who get them heavily subsidised.
The surpluses are created by the high price. It is a wonderful system when the Soviet Government, subsidised by the British taxpayer, can buy British-produced grain at half the price charged to the British farmer for his feeding stuffs.

Mr. Teddy Taylor: Does the right hon. Gentleman accept that there is no evidence to suggest that the Soviet Government sell that cheap food at cheap prices to their consumers? They sell it in their State shops and make vast profits, which can help to finance the invasion of Afghanistan and horrible Soviet oppression throughout the world.

Mr. Jay: I would only add that a considerable amount of the profit goes to a certain French Communist millionaire, who acts as a middle man. I have forgotten his name, but he is a well-known character.
The thirteenth report of the Scrutiny Committee speaks of "unprecedented quantities of butter" being sold to Russia up to January 1981. According to yesterday's Financial Times, from which my right hon. Friend the Member for Barnsley (Mr. Mason) has already quoted, sales of subsidised EEC butter and butter oil to the Soviet Union rose in the year 1980 by 60 per cent. Is that true? It would be interesting if it were, because the invasion of Afghanistan occurred in December 1979. I find it hard to believe, even of the EEC, that its response to that invasion was to increase by 60 per cent. its export of subsidised food to the Soviet Union.
It is also typical of the Brussels restrictionist mentality that, faced with the so-called surpluses, the Commission proposes not lower prices but a "co-responsibility levy" which will be applied to a number of commodities. That is the Commission's main new constructive idea. However, the prices are too high for two reasons—because they encourage excessive production and because they reduce consumption. The co-responsibility levy certainly lessens the incentive to produce, but, unlike a lower price, it does nothing to encourage a higher consumption. I have no doubt that the reason why the Commission prefers the levy to a reduction in price is that the levy diverts the proceeds to the EEC budget rather than to the consumer. It thereby increases the resources and power of the Commission. But why not let the consumer—for once—receive the benefit of the proceeds, even if he does not live in Soviet Russia?
For all these reasons, the CAP has a serious effect on the British economy. The wildly excessive price that we must pay for our food imports burdens the balance of payments, raises retail food prices and the retail price index, intensifies upward pressure on pay rates and, as a result, damages the competitive structure of British industry in exporting and competing with imports. Every year it inexorably raises the total amount of EEC budget expenditure. Let us remember that the relief gained by the Prime Minister's recent renegotiation of the budget will continue only until 1982. This week's edition of The Economist reminds us of that point.
In the long term, the CAP will inflict immense and growing damage on the British economy. In addition, it is seldom mentioned that the United Kingdom no longer receives the relief that it used to receive from falling food prices in times of world deflation or recession. That was a major relief and was one cause—in 1932 and 1952—of the recovery in the United Kingdom's economy. But now food prices in the United Kingdom can no longer fall, no matter how deep the world recession may be. That is one reason why far more violent internal deflation is needed today—in comparison with 1932 or 1952—if we are to check the rise in the retail price index.
In the past year our prospects have further worsened. Despite all that the Minister has said he cannot deny that in the past 10 years we have been repeatedly promised that if we stayed in the EEC we would be able to reform the CAP from within. We have constantly been told that. This year, two developments have shown that such a prospect is little more than an illusion. First, the Government refrained from putting forward any proposals of their own for reforming the CAP. Secondly, the Minister has been forced to abandon—as is almost inevitable under this system—even the promise to resist price increases for goods in structural surplus. The Commission's own paper is described as "Reflections on the Common Agricultural Policy", but it is an apology for the CAP rather than a proposal for reform. Not surprisingly, this week' s edition of The Economist—which is not exactly an anti-Common Market journal—states:
The price of backing non-reform now will be another British crisis next year.
Next year, the present budget relief will come to an end.
It is therefore more obvious than ever that the CAP will not be seriously reformed in the foreseeable future, and as long as it is not reformed there is little prospect of full recovery for the economy of Britain.

Mr. Colin Shepherd: I am grateful for having been called so early in the debate. I hope that the right hon. Member for Battersea, North (Mr. Jay) will forgive me if I do not entirely take up his points. He may recollect that I generally approach the subject of the EEC from the point of view that we should try to improve it rather than attempt to destroy it. Generally, the right hon. Gentleman's contribution was a veritable tour de force of destructive criticism. I accept that there is room for an enormous amount of improvement and that such improvement will not be made quickly. Nevertheless, we should apply our thoughts in that direction.
I am sorry that the right hon. Member for Barnsley (Mr. Mason) has left the Chamber. I should have liked to address my remarks to him. He is depressed about incomes in the farming sector. To say the least, his answers were elusive. When he replied to my intervention I wrote down "He is twisting and turning; nay, he is shadow boxing". We listened to a long exposition about his "position", which was as ephemeral as anything that one could imagine. The public would say that he gave a typical politician's reply. The right hon. Gentleman must have given some thought to the future of farm incomes. I hope that his colleague, the hon. Member for Edinburgh, East (Mr. Strang) will give us more of a clue.
The industry will be disappointed. The right hon. Gentleman drew attention to the high input costs that have been added to the industry from United Kingdom sources. He should bear in mind that one reason for those high costs is the inordinately high spending programme that was indulged in by the Labour Government throughout their period of office. If there had not been a change of Government the public sector borrowing requirement would probably amount to about £23 billion. Only 10 days ago the right hon. Member for Stepney and Poplar (Mr. Shore) asked for a further increase—over and above the Chancellor's increase—of £4·5 billion. That would have appalling consequences for the community. It is wrong to call for more public expenditure. We should be thinking in terms of less public expenditure.
If the right hon. Member for Barnsley reads the report of our debate he may like to accept an invitation that I should have given him personally if he had been in the Chamber. I invite him to come to my part of the world and look at some farmers' books. I wonder what he would then have to say about farm incomes and the prospects for agriculture in Britain. I shall refer to Herefordshire, because I represent that part of the world. I make no apology for representing my constituents as best I can on such an important matter. However, the purpose of the debate is to let the Minister take a sounding of the House before he goes to Brussels for the next stage of the negotiations on farm price policies.
In my part of the world the combination of agriculture and related industries is a major factor in the totality of economic life. The stresses that are being imposed by reducing farm incomes and investment are telling in an unfavourable way. In an area such as Herefordshire more people are dependent upon the general health of agriculture than probably realise it. If agriculture in the county were to collapse, or to take a nosedive, virtually everyone would feel it in one way or another, although probably fewer than the national average are directly employed in agriculture.
The country is predominantly involved in the livestock sector of agriculture, although there is a fair representation of all the other sectors. Therefore, we are interested in all the aspects of the settlement. This year's White Paper sets out a challenge to the Government. The figures set out in table 24 show the net incomes for different types of farms and reflect experience in Herefordshire and other parts of the country.
If the average drop in farm incomes is 10 per cent.—or 24 per cent. in real terms—the situation of the dairy, cattle, pig and poultry sectors will be that much more serious. Grain and the purely arable sector have not done so badly. There is stress in the livestock sector, particularly in Herefordshire. Indeed, Herefordshire is a microchosm of the country.
Ten days ago, at a meeting in Hereford, representatives of all the different sectors of agriculture came together. Auctioneers, farmers, machinery manufacturers, feedstuff suppliers, bankers and representatives of the chamber of commerce met to discuss what was happening on the agricultural scene. A regrettable tale of woe emerged—one that reflected quite accurately the none too encouraging story of the agriculture industry as shown in the White Paper.
Bank borrowing is on the increase. That is visible and measurable, but the auctioneers reported that they were acting as additional bankers. Credit was going up and they were carrying more and more paper from their customers. They suggested that the amount was increasing weekly. The feed merchants reported that they were facing the effect of a drop in livestock numbers and that their credit facilities were being more and more taken up. That is an increase in borrowing in another immeasurable sector. My hon. Friend the member for Devon, West (Mr. Mills) suggested that in his remarkable speech.
On another side, the abattoir operators reported an unacceptable squeeze on profitability, which was undermining their ability to stay in business. It can be of no benefit to a producer if there is only one abattoir in an area. He needs competition. The agricultural contractors

reported that down times due to breakdown were becoming longer as spares were becoming too expensive for dealers to keep. Agricultural equipment suppliers told of dwindling sales and poor markets. That is the totality of the picture, and is what agriculture faces throughout the country.
At the end, there is the tie-in with the consumer. The representative from the chamber of commerce reported that trade in the city of Hereford was palpably being hit by the lack of prosperity in the farm sector. It spills over and is a fundamental fact.
I do not suppose that the city of Hereford and Herefordshire are different from any other agriculture area that has a leaning towards the livestock side of the industry. It is probably typical. However, it demonstrates the stress and the interdependence of the system between the producer of foodstuffs, the processor and the consumer.
I pause for a moment to congratulate my right hon. Friend on what he has done during the past two years to develop a better harmony between producers, processors and consumers. His marketing efforts have shown real results at a difficult time.
Hitherto, I have considered the balance to be rather too much in favour of the consumer. I give that as a balanced judgment, bearing in mind that in my constituency I have substantially more consumers than I have producers, but I must put it across as I see it. As consumers we have, nevertheless, a natural reluctance to spend more on food. There is the stress. The Minister wears both hats, as a producer and a consumer, and has to tread a delicate path of even-handedness between both. But failing to come to terms with the proper needs of the producer will have far worse long-term effects than will the short-term difficulty of an increase in the retail price index.
To put the matter into perspective, if the proposals of the National Farmers Union or of the Committee of Professional Agricultural Organisations were to be accepted in full—I am not necessarily saying that they should be—it would add about 1 per cent. to the retail price index. That may be too high for some, but I do not think that it is a massive increase. In the context of a decreasing change in the RPI brought about by other Government policies, it should be possible to sustain that kind of increase.
The motion recognises the contribution that agriculture makes to the national economy and the need to obtain adequate returns for United Kingdom producers. That must be a priority for the United Kingdom in the farm price negotiations. The contribution of the agriculture industry over the past few years has been truly amazing. There has been an increase in United Kingdom growable foodstuffs from 6·3 per cent. to 75 per cent. in 1980, but it has been achieved for dubious reasons. The continued squeeze on farm incomes has made it imperative to produce ever more, just to survive. That is a kind of whip technique, rather than a carrot. It is not a sound basis upon which to continue, because it saps the long-term confidence of the industry. I am worried that the price of that may be too high in the long term.
It is agreed that the contribution to the balance of payments in import savings is important and has been significant. It is a magnificent record, but the industry is now becoming too highly geared. That is demonstrated by the increase in bank borrowing, which is so alarming, and the utilisation of other sources of credit, which makes the


system even more unstable. The country will not be well served if we overstress the system and cause a domino-effect collapse. That is taking it right to the end of the line, but I do not know how close we are to it. This year the emphasis must fall on the livestock sector in terms of the balance of settlements. Whatever final average figure the Minister negotiates, the weighting must favour the livestock sector, at least to the extent of halting the decline in real farm incomes and checking the increase in borrowing, also in real terms.
When the Labour Government were in office our livestock industry suffered badly from the effects of negative MCAs. These have been discussed. They assisted importers by undercutting United Kingdom production. Our pigmeat industry took a hammering from the Danes, the Dutch and the Germans, who increased their production to supply the United Kingdom market. I applauded the Conservative Government when they took office and grasped the nettle of green pound devaluation. They wasted no time about that. The effect was palpably not as forecast and there was not a massive increase in food prices as a result. Indeed, as my right hon. Friend demonstrated in his evidence to the European Legislation Select Committee, the greatest increases took place while there was the greatest green pound differential. He mentioned that earlier, and it is an important fact to take on board.
Now that the tables have been turned I want United Kingdom agriculture to have a chance to rebuild what it lost while MCAs were negative. It was not the farmers' fault that they lost the markets. They were doing their best, but against a 45 per cent. green pound differential they did not stand a chance and they lost. The present positive MCAs provide that opportunity. I urge the Minister to sustain his declared intention not to revalue the green pound as part of the package.
I concur with my right hon. Friend's assessment that a devaluation of the green pound will not necessarily lead to a corresponding drop in the food price index. I shall touch on the co-responsibility levies part of the package later.
In assessing the final level of percentage settlement, there is an additional element that I trust the Minister will take into account. Since the Commission published the first proposals the Chancellor has presented his Budget and has seen fit to seek to raise about £270 million from derv. I understand the Chancellor's dilemma. I mentioned it earlier. I have strong reservations abut the effects of that step because I feel that there have been a number of competitive pressures to keep price increases pent up, and those may now have been enabled to be released. There will be a surge in price increases, which will eventually find their way through to the consumer in an amount that will reflect the derv element in the product or service.
Apart from the consumer, the only sector that will not be able to recover its increased costs will be the farm sector. Those costs are set by the negotiations that we are discussing. That must be taken into account. Since we took up our first negotiating position there has been an additional identifiable element of cost on the bottom line, which must be accommodated. It is essential that the settlement should take that into account.
I have not left myself time to indulge in detailed comment on the interesting document "Reflections on the CAP", except to refer briefly to the cries of "Reform the CAP", which we hear so often during agriculture Question

Time and debates. There have been few constructive suggestions about how the CAP should be reformed, even though it seems to be such a simple thing to shout about. The fact that we have not heard many suggestions shows that it is a complex matter to reform or reshape the CAP.
My right hon. Friend touched on one significant point this afternoon that should never be overlooked when proposals are suggested, namely, that we must take into account the means of transition between the CAP as it is today and the CAP as it may emerge in future. Failure to do that could cause tremendous damage to the structure of certain sectors.
There is a need to develop longer-term thinking—the right hon. Member for Battersea, North (Mr. Jay) set out to do that—to deal with the ever-increasing output of European agriculture. The co-responsibility levy concept is part of that, but it is symptom-bashing. It is, in essence, a short-term approach, which sets up more enormous stresses and worries, as we have seen. European and United Kingdom farm incomes have been squeezed, and the writing is clearly on the wall. In no time at all we can confidently expect to be a surplus producer of every commodity, and not only some. That underlines the need to tackle that matter.
The gearing will become even higher and we shall find ourselves on another crazy treadmill of producing ever more with ever higher inputs of energy, fertilizers, and so on. If we put pressures of price on one sector to discourage production, that displaced effort will find some other way to restore the lost income. I put forward no solutions to the problem, except to say that I do not see the totality of surplus production yet being taken into account in the consideration of the changes necessary to handle what we can produce in Europe. The potential is frightening. If France and Germany reach the output potential of Britain we shall have real problems. We must come to terms with that.
In its own quiet way the countryside of the United Kingdom has taken a similar pasting to that sustained by the urban areas. Because our countryside is so beautiful and ever different, that is not always apparent. In its own way, it understands the traumas shaking the big traditional industries and views them with considerable sympathy. With its quiet determination, the countryside will continue to play its successful part in the nations's economy.
The rural areas must not be taken for granted. The continued and sustained health of the countryside is an essential element in the revival of Britain. The danger signals are there and must be recognised. Remedial action must be taken. The time for that is now.

Mr. Geraint Howells: I declare an interest as a part-time farmer and vice-chairman of one of our marketing boards. Although I was not in the Chamber at the start of the debate, I am delighted to note that we have not heard any pro-Market or anti-Market speeches tonight. Like many hon. Members on both sides of the House, I hold the view that the position of our industry is serious. We must be constructive in our approach and not attack Opposition or Government Members with responsibility for agriculture.
It has never been disputed that agriculture in Britain is highly efficient, yet there is a serious recession in agriculture today that bodes ill for Britain if steps are not taken to rectify it. Hon. Members mentioned the steep


decline in farm incomes in recent years. Let us consider some of the figures and the state of the industry. It is well known that farming income fell in real terms by 19 per cent. between 1978 and 1979 and by a further 24 per cent. in 1980—a fall of 43 per cent. in two years. That cannot continue. Bank borrowings increased by 30 per cent. to almost £3,000 million, most of the increase being needed by farmers to continue business.
The volume of total gross fixed capital formation in 1980 will probably show a decline of 10 per cent., with new investment in plant, machinery and vehicles falling by 23 per cent. Matters are serious in the industry. While producer prices increased by only an average of 6 per cent., farming input costs increased by an average of 14 per cent.
The net farm income position in Wales, as given in the official farm management survey, reveals a grim picture for 1980. Average net income for all dairy and livestock rearing farms taken together fell by 34 per cent. The net incomes of mainly dairy farms fell by 31 per cent., of low-land livestock farms by 35 per cent., of hill and upland mixed cattle and sheep farms by 45 per cent., and of hill and upland sheep farms by 58 per cent. Something must be done about that in the foreseeable future.
As a farmer myself I am only too aware of the difficulties—rising costs, high interest rates, and so on. I know that many farmers are having to borrow heavily to continue in business—not only in Wales but in other parts of the Kingdom. That borrowing does not represent investment in the farm; on the contrary, in a number of cases it means borrowing to pay off interest already accrued. I have been told that for some new entrants into the industry their interest charges amount to more than their total farm incomes.
In Wales, we are especally worried about the livestock sector. We are seeing a draining away of confidence, together with a serious decline in livestock numbers. The damage being done to our national herd is incalculable. Future production is bound to suffer and ultimately we shall have to rely even more heavily on imports. I am sure that hon. Members are aware that when agriculture suffers, so do related industries. The whole of the rural economy comes under threat.
Production costs have escalated seriously during the past couple of years. Britain has not been helped by the high interest rates that have prevailed. The most recent blow to farmers, together with other rural dwellers, has been the savage rise in petrol and diesel tax, which will inevitably have its knock-on effect on production costs and food prices. It is important that the Minister of Agriculture, Fisheries and Food should be aware of the industry's real worries. I am sure that farmers will have expressed their fears to him and his colleagues. I hope that he will take a clear message back to Brussels that British agriculture, because of our present economic difficulties, needs special consideration.
A 7½ per cent. increase in farm prices in this year's price review is not enough to prevent a further deterioration in the industry and will not even bring us back to the level of a few years ago. The Minister must insist on the higher increase, as recommended by the European farmers' organisation—COPA—of 15·3 per cent. Even this figure only brings us back to the 1979 level. As spokesman for the Liberal Party, I feel justified

in supporting COPA and its demands for a reasonable increase of 15·3 per cent. Coupled with that increase, the Minister must resist the revaluation of the green pound. In our circumstances, it would depress farm incomes even further, put the United Kingdom at a definite disadvantage in relation to our European partners, and result in unfair competition.
The right hon. Gentleman must also resist the super-levy on milk production in the United Kingdom. This country has a good record in that sector and production went up by only 1½ per cent. last year. The Commission has proposed that co-responsibility levies should be extended to other products but I believe this to be unnecessary. The principle of co-responsibility levies should not be an instrument of control over farming activities as it would, in essence, discourage diversification in the industry.
The Government must display a positive attitude towards agriculture as one of our foremost and most reliable industries. They must never fail to realise that farming is vital to our efforts to reduce imports. The industry as a whole has an excellent record for efficiency and production. Through no fault of its own, it is going through a bad time and needs substantial support and encouragement so that it can compete on an equal footing with other European countries. Farmers must have money to invest and expand. It is the Government's duty to take steps to make this possible. Our interests must be safeguarded at all costs in Europe.
The sheepmeat regime has turned out better than expected. I hope that the Minister, in his wisdom, will try to persuade his counterparts in Europe to change the clawback system, which is having an adverse effect on our slaughtermen and slaughterhouses. I have already declared my interest as vice-chairman of one of the marketing boards. Many sheep farmers are worried about wool production during the coming year. I do not want the Minister to divulge the increase that will be given this year, but I should like an assurance that there will not be a decrease in the guaranteed price for wool this year.
The hon. Member for Devon, West (Mr. Mills) made an interesting point—it does not matter what he said about me before I came into the Chamber—about the capital grant scheme, which is of great importance to many people. Farmers in this country take full advantage of the scheme but farmers in Europe have cheaper, lower interest rates. I wonder whether the Minister would consider allowing farmers in this country to opt for either the scheme or lower interest rates. The suggestion is worth considering. I have been advocating for many years that the Minister should examine the possibility of setting up a land bank in this country to help young farmers. These farmers, especially the young entrants, need help.
Many hon. Members have blamed the Community for the state of the common agricultural policy. Many have urged that the policy should be reformed. I wonder, at this late stage, after Britain has spent many years as a member of the Community, whether it is not time to look at the method of selling surpluses. A child could sell butter to the Russians for 20p or 25p. It would be worth spending money on research to discover a better market for selling surpluses. The possibilities are great.
If British farming is to survive and responsibilities are to be shared with farmers in Europe, we shall have to co-operate—sooner rather than later. We should discuss our problems as they are debated in this Chamber. For the first


time in the three or four years, I am delighted that hon. Members on both sides of the House are talking about the situation in this country without indulging in anti- or pro-Market speeches.

Mr. Robert Hicks: It is a pleasure to follow in debate the hon. Member for Cardigan (Mr. Howells). He brings a genuine knowledge to the House and inevitably speaks with much good sense. The content of his speech, delivered as spokesman for the Liberal Party, was in marked contrast to that of the official spokesman for the Labour Party, the right hon. Member for Barnsley (Mr. Mason). The hon. Member for Cardigan made clear where his party stood on the key questions of the amount of increase in prices for the various products and revaluation, unlike the right hon. Member for Barnsley.
It will be evident to the House and indeed to the country that for the past 12 months agriculture has had a difficult time. 1980 followed a difficult year, because 1979 was not a good one either. Irrespective of the criteria used for measuring the economic performance of our farming industry, the results can be described only as depressing. Farm incomes in Britain fell by 24 per cent. in real terms in 1980, compared with 18½ per cent. for the European Economic Community as a whole. Bank borrowings are up. They are estimated at almost £3,000 million in 1980—an increase of 30 per cent. over the corresponding figure for 1979. The level of investment in agriculture has fallen significantly. Whether we examine the investment in buildings, farm machinery or, most worrying of all, livestock breeding herds, we find that investment has fallen.
The fall in the size of the livestock herds is a source of great concern. As my hon. Friend the Member for Devon, West (Mr. Mills) said, there is a danger of an imbalance occurring between the livestock sector and cereals. One has only to travel between London and Cornwall, as I do, and look at the landscape from the train window to see fields that were recently pasture land being ploughed. That pattern is repeated throughout the United Kingdom. Areas which were automatically assumed to be permanent pasture land when I first became the Member for Bodmin 10 years ago are now being ploughed.
I was pleased that the Minister recognised the problems that could result from this imbalance. What he said confirmed the statement he made to the Select Committee on European Legislation a fortnight ago. It is important that, whatever is the final figure of the price increases, the largest increases should be paid to the livestock producer. The continuation of the suckler cow premium is welcome, although I doubt whether the proposed 8 per cent. increase is sufficient to meet the producers' increased costs.
I regret that the Commission has not proposed the continuation of the variable premium scheme for beef. It is an important component part of the support arrangements for beef. If the scheme is discontinued the smaller herds characteristic of West Country farms will be in considerable difficulties. I emphasise the need to retain this aid. It is important to the economies of the smaller farm units characteristic of the West Country, which are predominantly mixed but have an emphasis on livestock.
The Commission has proposed price increases for products varying between 6 and 12 per cent., averaging

7·8 per cent. The European farming unions have called for a 15 per cent. average increase. No doubt the eventual average figure will be somewhere between the two.
In coming to our individual assessment of the final figure we must not forget that the economic climate of the Community as a whole is far from healthy. The disposable incomes of the consumers are unlikely to grow much during 1981. We also have high unemployment. Therefore, whatever price is eventually agreed it must be pitched at such a level that its effect will not price the producer out of the market.
In that context there is a need to examine the composition of the input costs of producers. There are areas where our Government have a direct influence. Interest rates, thankfully, are beginning to fall, although some of us believe that they have not fallen sufficiently. Another area where our Government have a direct influence over input costs is in the price of fuel. I withdrew support from the Government over the Chancellor of the Exchequer's 20p increase in the duty on petrol and derv.
On one aspect of the Commission's proposals I am certain. The Minister must oppose any suggestion of a revaluation of the green pound. Given the serious deterioration in the level of farm incomes in the last two years, the Commission's suggestion that the average price increase of 7·8 per cent. should be offset by a green pound revaluation of 5 per cent. is totally unacceptable and must be vigorously opposed.
If it were to be implemented it would mean that the average farm price increase in the United Kingdom would be less than 1½ per cent. That would destroy confidence, jeopardise future domestic output and place our producers at a disadvantage compared with their European counterparts. We have only to witness the massive State aid programme in France to see the potential danger of France's production coming into our market if our producers have any unnecessary handicap placed upon them. It would also be harmful to our balance of payments position.
I was worried by remarks attributed to the Chancellor of the Exchequer, who was reported as seeming to favour in principle the Commission's proposal to revalue the green pound. I hope that the Minister and the Minister of State will be in no doubt of the feeling of Government Back Bench supporters that there must be no revaluation of the green pound, irrespective of the Treasury view.
The co-responsibility levy proposals cause me concern. It does not make economic sense to penalise the more efficient and successful producers. I am pleased to hear what the Minister said and I am sure that he will carry the support of the House and of the farming community in his determination to oppose any extension of co-responsibility levies which discriminate against the United Kingdom.
Finally, I make two general observations. I welcome the fact—to which the hon. Member for Cardigan referred—that this debate has not deteriorated into a discussion of whether we should remain within the European Economic Community. It is fashionable to attack our membership of the Community. It is fashionable for far too many people, both outside and in the House, to use Europe and our membership of the EEC as a scapegoat for our poor economic performance in other areas.

Mr. Nigel Spearing: Does the hon. Gentleman agree that using the word "fashionable"


implies that it is a done thing without any basis in fact or logic? The hon. Gentleman will know that many of us who opposed our entry and continue to oppose our membership have never used it as a scapegoat. Will he agree that the others who are now seeing it as such have good reason so to do?

Mr. Hicks: I do not want to enter into a discussion with the hon. Gentleman on the definition of the word "fashionable". I think that he understood the point that I was attempting to make when I used it. I resent people jumping on the anti-European bandwagon as a means of covering up our poor industrial performance, which has nothing to do with our membership of the EEC.
It is significant in the context of British agriculture that the level of United Kingdom farm support for agriculture in January 1973, which was subsequently incorporated into the common agricultural policy, was £370 million. At today's figures that would be in excess of £1,200 million. I suggest quite sincerely to the House that, given the Government's policy of reducing the rate of increase of public expenditure, the figure of £1,200 million would be subjected to considerable pressure, not least from Treasury Ministers, if we were still responsible for supporting British agriculture ourselves. I for one am pleased that it has been taken out of our hands and is a European responsibility.
Secondly, it is important for the House to remember that although we are debating farm prices today, in practice we are not only talking about the level of farmers' incomes and the supply of food from the national farm but considering the future stability of the countryside. My hon. Friend the Member for Hereford (Mr. Shepherd) made this point vividly in his important contribution when he said that farm incomes contributed directly to the preservation of our rural areas since farming is the principal economic activity in the countryside. We can encourage forestry, tourism, and suitable light industry, which are, of course, important, but they are secondary to agriculture.
For a number of reasons, rural areas are under threat. Because of population movement, lack of employment opportunities, lack of transport, possible closures of village primary schools, and changes in the system of assisting village post offices, the stability of the countryside is in many ways being threatened. I believe that the nation as a whole wishes to retain our countryside, but if we are to do that we must make certain that the viability and confidence of the farming industry are both maintained and encouraged. As my right hon. Friend the Minister said, in the past year the farming community—indeed, the countryside as a whole—has made a major contribution to combating inflation.
For these and the other reasons that I have outlined, I believe that this year's farm price increase should be as generous as possible.

Mr. Thomas Torney: It is with great regret that I have to disappoint the hon. Member for Cardigan (Mr. Howells). Arguments for and against the Common Market are bound to enter into what I have to say. The hon. Member, for whom I have great respect, understands farming and has a great interest in it, but he

says that he is pleased that this debate has so far been concerned with farming and agriculture at home rather than in Europe. I must point out that because Britain is a member of the Common Market and is so vitally affected by the common agricultural policy we cannot discuss agriculture in Britain without also saying something about agriculture in the rest of the EEC. One is affected by the other; both are affected by the CAP.
I am one of those who believe that it was a criminal act for Britain to enter the EEC with the common agricultural policy as it then was and, give or take the dotting of an "i" or the crossing of a "t", still is. That is simply because, as I have said many times before but as I think is worth repeating, this country does not produce all the food that it needs; we have to import a large proportion of our food needs. The EEC, particularly in the CAP, is geared to giving the greatest protection to those that produce all or most of their own food needs, and perhaps surpluses as well. For that one vital reason we should not have gone into the EEC in the first place.
A few years ago, in the referendum, a colossal campaign was mounted by the people who supported an affirmative answer. Everyone had a leaflet through his door from the "Yes" campaign people. The "No" people did the same, I agree, but the "Yes" people had far more financial aid behind them, some of it European money.
The "Yes" leaflet said that British jobs would be more secure, that food costs would fall, and that many other things would happen. We all know that it is difficult to say which has increased more quickly—unemployment or the cost of food. We were told that these things would not happen if we went into the Common Market, but we have all seen what has happened to jobs and food costs.

Mr. Myles: Does the hon. Gentleman concede that food prices in this country, as a proportion of income or in relation to inflation of other prices, have actually gone down?

Mr. Torney: I cannot concede that. I do not have the figures to prove it, but I do not think that food prices have fallen in relation to income. If we are to argue about the cost of food we must remember that a rise in the price of foodstuffs affects the lowest income groups far more than rises in the price of other commodities. We have to buy food of some kind every day, or at least every week; we do not need to buy many of the other items in the index so frequently. With the present mass unemployment and the growing poverty that it brings in its wake, action should be taken by the Government or the EEC, or both, to help the fixed income and lowest income groups.
We cannot divorce the problems of agriculture from a general attack on the Common Market as a whole; I have not just got on this bandwagon. My right hon. Friend the Member for Barnsley (Mr. Mason) rightly said that 70 per cent. of contributions by all member countries go to the Common Market agricultural fund. That is a colossal figure. Various hon. Members have said that the only way to save the countryside and British farming is to push up the price of the nation's food. That is an indictment of the EEC and of the common agricultural policy.
We cannot stand by and see British agriculture collapse but it is a crying shame that the only way to save it is to make food more difficult to buy when there are vast surpluses in the Common Market. Pushing up the price will only ensure that less is consumed. That is also an


indictment of the policy. We know that the EEC itself is partly responsible for the higher prices because the British farmer has to pay much more for things such as feeding stuffs than he would have to pay if we were not a member of the Community. Of course, Government policy means higher taxation of items which the farmer needs, such as petrol, and higher interest rates.
How much better would it be for this country and our farmers if we relied, as we did before we entered the EEC, on deficiency payments fixed by the Government by means of guaranteed prices. My right hon. Friend the Member for Battersea, North (Mr. Jay) and other hon. Members have referred to deficiency payments. We are paying dearly for surpluses which we do not create. The bulk of the surpluses of farm produce are found elsewhere in Europe—in France and perhaps in Germany. Those are the countries which are benefiting greatly from the massive contributions which we and others make to the EEC.
The Prime Minister was instrumental last year in securing a reduction in our net contribution to the Common Market fund. Let us remember that in 1980 we were contributing £3,000 million to that fund. Because the bulk of that money was going to support Common Market agriculture, I have the right—I do not apologise for using it—to attack something that is bad for Britain.
Deficiency payments have been attacked. It has been said that colossal payments would have to be made if we returned to that system. But we would be paying our farmers to bring their returns up to the market price. The payments would be made not across the board but where there was a need, and they would go only to British farmers, whereas through the common agricultural policy we are now paying for the surpluses that the French are producing and not for surpluses produced by Britain. I must emphasise that our net contribution of £800 million is still too high, despite what the Prime Minister did last year.

Mr. Geraint Howells: Just for clarification, the deficiency payments scheme is still operating in this country for beef and lamb but we call it the variable premium scheme. It is a wonderful system. That is what we were advocating for many years, and we still have it.

Mr. Torney: Some Conservative Members have said that we should not suggest any alternative or reforms to the common agricultural policy. In the first place, reforms are impossible. The suggestion is pie in the sky, because the French would never agree to reforms. If I were a Frenchman I would not agree; why should I agree to a suggestion from Britain or anywhere else that would take away some of the income that the British taxpayer was kind enough to give me for the surplus that I had inefficiently produced? Of course, the French will never agree to reforms. Because it is not possible or feasible to reform the common agricultural policy, all that we can do is get out of the Common Market.
In reply to the hon. Member for Cardigan (Mr. Howells) I know that there are deficiency payments. What I should like to see is the return of deficiency payments for dairy produce, milk, and so on, instead of having the completely ridiculous situation that we have today.

Mr. Dykes: rose——

Mr. Torney: I am going to finish what I am saying. Not only do we have to pay the French farmer for producing his surplus of dairy products; we also have to pay——

Mr. Dykes: rose——

Mr. Torney: I will not give way. I will carry on a little longer if the hon. Member insists on interfering in this way.
The common agricultural policy ensures that we not only have to pay the French farmer for producing surpluses in dairy goods; we also have to pay on this side, because our farmers are being forced out of the dairy industry even though we did not have a surplus. It is stupid and ridiculous. Hon. Gentlemen opposite talk of silliness. What can be sillier than what I have just described? We pay for somebody else's surplus and then cut down our own production when we did not have a surplus to begin with. That is extremely silly. If the hon. Member for Harrow, East (Mr. Dykes) thinks that I am silly to say that, there must be something wrong with his thinking.

Mr. Dykes: rose——

Mr. Torney: I shall not give way. Despite the apparent sadness of Conservative Members earlier and the distress that they displayed on behalf of farmers, we must get down to the rudiments of the vicious Common Market, which constantly reacts against the British people and farmers. It is no laughing matter. It is no joke when people in my constituency have to pay high prices for food and farmers are not getting a fair crack of the whip.
I want to defend British agriculture. I do not want it to fade away or be weakened, but it should be remembered that the farmers have asked for what they have got. They could not join the Common Market quickly enough. Now they are suffering from their foolhardiness in pressing the Government, as the NFU did, to join in the Common Market.
I am proud of the dairy industry, but also concerned about it. It is an excellent and efficient industry, from the farmer who produces the milk to the distributor and the roundsmen who bring the "pinta" to our doorstep each day. I never fail to express my concern in the House for the industry. Because of the CAP and the EEC, it is in danger and will continue to be in danger until there is no question of any French milk coming into Britain. We do not want to lose our daily "pinta". I am sure that the Minister of Agriculture will do his utmost to defend it and to protect our dairy industry from the import of cheaper French UHT or other milk.
The fact that our dairy industry can be threatened in this way is another indictment of the CAP and the Common Market. Perhaps we should withdraw from the CAP, support our own industry, let the French and the Germans support their industries, and pay no levies on food coming in from third countries. But would the French or the other member States allow that? I hardly think so. If the CAP were abolished the Common Market might not be such a bad organisation to belong to. At least we could look after our interests, and the French and the Germans and the rest could look after their interests. That would be a more equitable way of dealing with our food and farming industries. Our farming would no longer be in the state that hon. Gentlemen say it is today.

Mr. Geoffrey Johnson Smith: After the tirade of the hon. Member for Bradford, South (Mr. Torney) against the Community, it is difficult to know where to start. I had not intended to say much about the EEC, nor had I intended to defend it, but in view of what the hon. Member for Bradford, South said I must say a few words. I hope that my hon. Friend the Minister will back my general argument with some statistics to complete the final demolition of the hon. Member for Bradford, South, who, basically, does not want us to belong to the EEC for agriculture or for any other industry.

Mr. Torney: It does no good for textiles, either.

Mr. Johnson Smith: The chauvinistic approach that the hon. Gentleman epitomised with such distinction and vigour is as dead as the dodo. If he wants to fight along with other dodos in his party he is entitled to do so, but it will do no good for British agriculture, industry or employment if this country comes out of the EEC. Indeed, most top trade unionists in this country know that. Let the hon. Gentleman trot out his arguments in Bradford, South and see how far he gets.
Does the hon. Gentleman imagine for one moment that if this country were outside the EEC and we tried to buy at world market prices we would get cheap food? It is not lying around. He knows that as time passes more and more countries want to consume that which they produce. He knows, too, that more and more countries in Africa are crying out for food.
Let us take one example, butter. The United Kingdom's annual consumption of butter is equivalent to two-thirds of the available butter at world prices on the market. If Britain and the rest of the EEC entered the market, does the hon. Gentleman imagine that that world price would remain the same? Of course it would not. The price would shoot up.
No one denies that some aspects of the CAP can be criticised. Does the NFU, which knows far more about the matter than the hon. Gentleman, want this country to come out of the Community? Of course it does not; and its members know what they are talking about. The hon. Gentleman treated us to a series of worn-out platitudes. I do not take him seriously, but he is entitled to his opinion.
In considering the costs of the CAP we must bear in mind that as a proportion of our national income, or as a proportion of the national budgets of the different countries, they are not large in themselves. Seventy per cent. of the Community's budget goes on agriculture. It is no good imagining that if there were no EEC we would have vast savings in the amounts devoted by the different nations to the cost of supporting agriculture. There is no cheap way.
One criticism that is justified is that the CAP is not as well designed as it should be, and that it helps to create too many surpluses. That is why some of us hope that it will be reformed. It could be suggested, for example, that where there are super surpluses the national Governments should pay for them. Similarly, it could be argued that EEC funds which are used by countries to support agriculture for social reasons, as the Germans do in Bavaria, should come out of the social fund and not out of agriculture. We expect that in time reforms will give better value for money. I have little doubt that no solution will be found outside the EEC.
I turn to constituency matters. I apologise for dwelling on the problems of farmers in my constituency, but I represent an area that is still primarily rural—the Weald of Sussex, stretching into Kent. I bring these problems to the attention of my right hon. Friend and the Minister purely to reinforce the arguments that they will adduce when they go to Brussels. The position is critical. Statistics show that some sections of the dairy industry face serious financial problems.
With colleagues from Sussex constituencies, yesterday I met local farmers, and I had a personal meeting with them in my constituency. They appreciate that they cannot be insulated from the effects of a world and national depression. They appreciate that, like others, they must bear the burden. They recognise that there is a limit to what Governments can do. They appreciate that, where possible, the Government can and will help. In the poultry industry, which is strong in Sussex, there is an appreciation of the way in which the Government help to tide farmers over the difficult period which results from some EEC countries not carrying out poultry hygiene inspection. There is a general appreciation and understanding of the Minister's and the Minister of State's valuable role and of their determination to stand up for legitimate interests in negotiations in Brussels.
I emphasise that farmers are not making a general moan about what could be done or is being done. However, we hope that the Minister will achieve greater success when he goes to Brussels.
The small farmers on the Weald farm land which, compared with that in East Anglia, is poor quality—grades 3 and 4. However, their efficiency is higher than that achieved by Continental farmers. What would happen if we were to let farmers move out of the dairy industry? To what other sectors could they turn? They could turn to growing cereals. Some have already done that, and others have gone into beef.
The chairman of the East Sussex branch of the NFU told me yesterday that we must consider the overall effect of such moves on the balance of farming in the county and on the nation as a whole. If we continue to allow livestock to decline at the present rate it is bound to have a knock-on effect on farmers who grow cereals. An imbalance will have serious effects on other parts of agriculture. People who farm the less good land and concentrate on livestock have legitimate needs.
I turn to the question of costs. I elicited some figures from pig farmers in my constituency. Taking 1975 as 100, the cost of energy and oil in 1980 was 250. Veterinary and medical services now cost 204. Feedstuff has increased to 185 and livestock to 146. I hesitate to say that the 8 per cent. increase will be enough.
A man who farms a larger than average farm in my constituency recently sent me his trading account. He achieved an increase in income of about £10,000 in 1980. That is a sizeable increase. His income increased from £86,000 to £96,000. In spite of that increase, his profit dropped by £4,000.
One must consider the effect on investment. One farmer in my constituency told me that until recently he spent, on average, £7,000 a year on capital improvements and the machinery to run the farm. In 1978–80 his expenditure fell to about £1,000 a year. He has refused to increase his investment and has dropped it further because he is unwilling to increase his overdraft.
Another typical example is that of a farmer who wrote to me saying:
As I said in my previous letter, despite expansion our financial books show us to be breaking even at present, though this hides a substantial loss, since we have spent next to nothing on new items or maintenance of existing buildings and machinery … My employer, who has hundreds of thousands of pounds invested in the farm takes not a penny in interest from it. All profits, such as they are, are ploughed back in. If this isn't subsidising the EEC housewife, I do not know what is.
The knock-on effect on investment is serious. If it is allowed to continue in the next few years the much-vaunted lead that we have in farming efficiency in relation to our Continental competitors will narrow.
I turn to the question of the levy and super levy. I agree with what has been said, particularly by my right hon. Friend the Minister. Will the levies exclude additional deliveries of fresh products to dairies? I refer, for example, to the additional deliveries of cream and yogurt and other products that cannot go into intervention. I hope that the levy will be charged on increased production in the milk marketing area as a whole. I know that the detailed proposals have not yet been worked out. However, the Minister believes it to be reasonable to suppose that even if the levy were to be applied specifically to individual producers who increase production, allowance would be made for those who have moved to larger farms.
I turn to the question of the suckler cow premium. One of its disadvantages is that if one farms a dairy farm and owns another farm on which beef is produced one does not qualify for the premium. Anyone who also produces milk is therefore not eligible. The old British scheme allowed participation if an enterprise was on another farm or run as a separate unit. A number of farmers in my constituency are involved in such farming. They believe that the system is unfair, particularly as 65 per cent. of the beef comes from dairy farms, where no subsidy is paid until market prices fall below the cost of production guarantees. I hope that the Minister of State will comment on that.
I turn to marketing. I welcome what my right hon. Friend said about the work that he has done since he took office. Marketing forms an indispensable part of a successful agriculture industry. Unfortunately, it has been one of the weakest aspects of British agriculture. There is a danger that in advancing the cause of marketing we are likely to create the impression that we are interested in setting up yet another bureaucracy. In short, the requirement to market must lead to a better marketing of the marketing system. It is necessary to convince those concerned that they need to engage in marketing. If they are not convinced there is the danger that they will consider marketing as merely another layer of bureaucracy.
There is confusion about what marketing really involves. For example, at one time the Milk Marketing Board did not really market; it merely collected milk and sold it as a monopoly supplier. It has now become much more a marketing board. It has set up special divisions to convert milk into value-added products and to go into the market place to sell those products in competition with imported products as well as with products sold by the private sector. That is marketing, and I welcome the change.
There are those who have promoted British products by means of advertising campaigns and the like. That is not in itself marketing. No advertising campaign can succeed on its own unless product outlets have been planned and

there is a proper delivery system. I suspect that we have far too many organisations which are good at telling the public that we have a product but which are not good at ensuring that the product is sold and marketed successfully at the right place, at the right time and at the right quality.
It was Mr. Hoyn who said at the Oxford farming conference that when it came to penetrating the American market recently the way that the French went at it was in marked distinction to the way that we went at it. The French had a well consolidated group that was determined to reach the right wholesalers and to ensure that a proper method of distribution was established. On the whole, we are content to have a number of different groups that do not go into these matters in such detail and are far too scattered in the effect that they have.
The need for marketing is understood by some in general terms but the details of what is involved are not normally sufficiently appreciated. The concept must be sold before it is fully accepted, as I think it should be.

Mr. Nicholas Baker: Did my hon. Friend examine the way in which the French apple producers studied the British market, engaged in a marketing campaign and produced exactly what the British housewife wanted, as they assessed the market? That demonstrates how important it was for the British apple producer to mount a counter-offensive, which, alas, was introduced many years too late.

Mr. Johnson Smith: I am grateful to my hon. Friend. I had that example much in mind. The campaigns that we have seen have been of the generic sort. For example, there have been campaigns mounted with slogans such as "Eat more British apples" or "Consume more British beef". There was a bacon campaign that was supposed to encourage British bacon consumption. It merely made the public more aware of bacon generally. It benefited Danish bacon exporters as much as British bacon producers. These general exhortatory campaigns—I speak as someone involved in advertising—are not worth very much money. They lead to an awareness of the product, but they need a much more professional follow-up, and that is what we have lacked.
I congratulate my right hon. Friend on the initiative that he has taken, and especially on the way in which he has tackled the formidable problems that have faced him. I am glad to note that in the detailed negotiations that he has undertaken during the past two years he has persisted in upholding our interests in a way that is to be firmly praised and has never lost sight of the need for us to operate in farming as in other matters to do with the British economy, in the wider context of the European Economic Community.

Mr. Wm. Ross: It is my intention to limit my remarks to the memoranda of 17 March, which relate to the development of livestock production in Ireland. Before doing so I shall take up two issues that have been raised by right hon. and hon. Members during the debate.
Milk production in Europe was referred to by the Minister of Agriculture, Fisheries and Food and by the hon. Member for Devon, West (Mr. Mills). We are always grateful to the hon. Gentleman for his interventions on agriculture in Northern Ireland. The right hon. Gentleman


and the hon. Gentleman drew attention to the increasing efficiency of milk production in Europe and to the difficulties that that is causing. However, neither of them suggested any means of enabling the British Government to deal with the problem in the EEC.
At some stage a decision must be made to reduce the number of cows in Europe. The greater the efficiency and the higher the production the more cows must go. That solution has been tried before. It has been more or less a continuing process in one European country after another. What success has there been to date and what new measures will have to be dreamed up to deal with the problem posed by the policies of the French, German, Belgian and other producers?
A wider problem is the steadily increasing efficiency of all farming on the Continent of Europe. At some stage we shall have a surplus of all agricultural products. If the money is available there is no good reason why that should not be so.
The right hon. Member for Battersea, North (Mr. Jay) drew attention to the attitude displayed by the French. France is not the only country in Europe which produces politicians who look after their own national interests. Recently we had a visit to Northern Ireland of a certain Mr. O'Kennedy. During his visit he said that the importation of grain was the importation of acres and that therefore it was bad for us. Northern Ireland has a highly intensive pig and poultry industry, which was entirely dependent on imported grain until we entered the Common Market.
In effect, Mr. O'Kennedy was saying "I want to see the Northern Ireland intensive sectors disappear". If they disappeared, those who would fill the gap would naturally be the nationals of Mr. O'Kennedy. It appears that all the other nations in Europe are looking after their own interests. The Government Front Bench, regardless of which party is in power, should keep that very much in mind whenever negotiations take place in Europe.
I turn to the development of livestock production in Ireland. It is among the papers that are before the House tonight because of the backwash effect that it has in Northern Ireland. It is an indication of how policies that are being sought by the United Kingdom can have a backwash effect in France, Germany and elsewhere.
The Dublin Government justify the package which they seek by reference to the fall in the incomes of the farming community in the Irish Republic. I applaud the Minister of Agriculture, Fisheries and Food, who said in a Select Committee in the other place on 18 March and again this evening that the Government could approve such a package only if a similar package were available for Northern Ireland, where conditions were worse than in any other part of the United Kingdom. The hon. Member for Cardigan (Mr. Howells) quoted the fall in income not only for the global farming industry in Wales but for individual enterprises. The highest fall to which he referred was 56 per cent. over the past two years. The fall in Northern Ireland agriculture in the same period was 80 per cent. The figures for Wales seemed to be the equivalent of a bright and sunny day. That gives a fairly clear picture of the gloom—if gloom can be described as a clear picture—in the Northern Ireland farming industry.
I am deeply troubled by the package which is being sought for the Irish Republic, because the frontier problems to which I referred in my intervention to the

Minister are many. There is much illegal movement backwards and forwards across the frontier, as the Minister knows. We should not add to those difficulties. If the package goes through, however, they will increase. The internal problems of agriculture in Northern Ireland are also many. To add to them a further burden of subsidised competition from the Irish Republic will not be helpful.
Roughly £1½ million—£ sterling, not punts—will be made available for progeny testing. That is not a large sum. However, the Northern Ireland Exchequer has always had to pay that out of the funds available to Northern Ireland. There is to be an allowance for artificial insemination. The package is supposed to be for beef cattle, yet that AI package is for 1½ million cows. There are only half a million beef cows in Ireland. So, where is the rest of the money going? If it has to be used for AI, evidently it will have to be used not only in the beef herd but in the dairy herd in the Republic. That amount cannot be spent on the existing number of beef cattle. The sum which is available is a benefit equal to about half the cost of the insemination of each animal. That is a considerable saving. The idea that it should be handed over and forgotten about is not acceptable.
It is proposed that there should be a £2 subsidy per tonne of lime for application on agricultural land. The theory is that the lime will be applied to grazing land used by the beef herd. Anyone who would believe that story would believe any story. Even if the lime were initially put on land so used there is no reason why that land should not be ploughed the next year and sown with barley, sugar beet or some other crop that would benefit from lime. Again, there is a use for production subsidies beyond the original intention.
The subsidy for making silage is supposed to be applied to first-time makers and to the first 50 tonnes. If there is no silage pit, will there be a grant or subsidy for erecting such a pit? That matter causes deep concern, because many people make silage. One wonders how the money will be spent if it is restricted to the remaining farmers who would become first-time makers.
There is also subsidising of the documentation of the movement of TB and brucellosis-tested cattle in the Republic. That cost has always had to be borne either out of the Northern Ireland Exchequer or by the farming community. The reason why it is so important in the Republic is the high incidence of TB and brucellosis in cattle in the Republic. The farmers and the authorities there never seem to be able to get control of it. There are many outbreaks in the national herd of the Irish Republic which have not been resolved. The United Kingdom funds had to bear those sums whenever, in Northern Ireland, we tried to free our herds of those two diseases.
There is a proposal to pay an increase in the suckler cow premium. At present, half that cost is borne directly in the EEC budget. The proposal is that the rest of it will be so borne that 100 per cent. of those sums will come direct from Europe rather than from national funds. Perhaps the Minister will confirm that it is not the intention of the Irish Republic to pay that money and that what is being received is a bit of icing on top of the cake. The increase would be designed to cover three-quarters of all beef cows in the Irish Republic. That is a considerable input, which must reflect adversely on farmers in Northern Ireland.
There are a number of policy implications. The principal one is that if the money comes direct from Brussels, as it is designed to do, we have to pay for it. In


other words, we are being asked once more to buy the knife which will cut the throats of our farmers. That will not be acceptable to anyone in Ulster.
The Minister of Agriculture, Fisheries and Food said that he wanted equivalent treatment for Northern Ireland. If he is to obtain those additional funds for Northern Ireland he will run into all the hullabaloo which surrounds the additionality rule in the processing of EEC funds into any sector of the British economy. If it is going to be equivalent, total public expenditure in Northern Ireland will have to be raised. It will have to be directed straight to the agriculture sector in Northern Ireland.
Will the Minister tell us how those sums will be applied? The only way in which they can be applied easily is by raising the present limit of public expenditure in Northern Ireland and by making use of the problems which are now being experienced by the upland producers, not only in Northern Ireland but throughout Great Britain. The only ways it can be used there are either by raising the present premium on the upland and beef herds, or, even better, by extending the less favoured areas. As the right hon. Gentleman knows, the survey in Northern Ireland was completed long ago, and there is no reason why the proposal should not go ahead, except that the remainder of the United Kingdom would want the same treatment—and why not? Other areas are also experiencing considerable difficulties.
The Secretary of State mentioned the desperate state of Northern Ireland agriculture. What he said today and what he said to the Select Committee a few days ago shows that he is aware of the position, but understanding does not help unless he takes action. What action do he and the Secretary of State for Northern Ireland intend to take this year and next year?
I have a farming background, and I know that farmers have been living on savings and capital tax allowances in the past year or two in order to maintain their standard of living. They save money by not buying machinery. The Agricultural Machinery Dealers Association states that sales of new tractors dropped by 41 per cent. between 1979 and 1980. In the first two months of 1981 sales were down by 50 per cent. compared with the previous year. If the trend continues, tractor sales will be down to 30 per cent. compared with two years ago. The rundown in farming carries through to suppliers, and so on. It cannot continue. Something will have to give.
The tremendous increase in per capita and per acre production since the end of the war has a limit. We cannot overwork land and people too much. Production cannot be pushed up for ever. Farmers and the nation have a limit on the money that they can put into production. We may already have reached the technological, biological and labour limit. Perhaps we reached it some time ago. The rate of decrease in manpower and the increase in production per acre will flatten out.
We may soon have to spend a greater proportion of our income on food, with a shift in the emphasis on the family budget. An hon. Member denied that the price of food had dropped. He is wrong. The price has been dropping for a long time. A change is overdue. I am concerned about British farming—about its future and especially the situation in my Province. I hope that the Minister can give us hope that action will be taken to bring about an improvement.

Several Hon. Members: rose——

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I point out that nine hon. Members wish to speak before the Front Bench speeches start.

Mr. David Myles: I hope that I can change the accent of the debate. I declare an interest. I receive hill livestock compensatory allowances, sheep deficiency payments, the ewe premium, the suckler cow premium and capital grants, and I also have an interest in lower interest rates. However, I do not plead the cause of the farmer or point out the dreadful drop in incomes, as did the hon. Member for Cardigan (Mr. Howells) and my hon. Friends the Members for Hereford (Mr. Shepherd) and Devon, West (Mr. Mills). They are not promoting their interests, so their pleas may do more good.
The debate is about the CAP. It has become the whipping boy of politicians. The call for reform has become a parrot cry when people can think of nothing more constructive to say. The adaptation of the CAP for the 10 nations must continually evolve and constructively improve to suit changing circumstances. We should not scrap previous constructive work in case we are left only with empty ideas to fill the void.
The hon. Member for Bradford, South (Mr. 'Forney) said that the NFU advocated entry into the EEC. I am a former office bearer of the NFU in Scotland. We did not recommend entry. We put the arguments on each side and told members to please themselves. No recommendation was made then, but now that we are in and have the benefit of the supports, the recommendation is to stay in.
I repeat the three principles on which the CAP is based. The first is freedom of trade and Community preference. A great number of people do not like the Community preference. The second is the creation of market organisations based on common prices. We have not yet achieved that, but are moving towards it. The third is sharing the cost of the common policy. We are arguing about equitable sharing.
How far have we achieved the objectives of article 39 of the Treaty of Rome? Paragraph 1 states'
The objectives of the CAP shall be (a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour".
That objective is continually being met. The section continues:
(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture.
Sadly, that has not been met to any great extent.
If support prices in Europe are frozen, as has been Advocated—I shall return to this later—far from maintaining the earnings of individual persons engaged in agriculture, the real income of those people will be greatly eroded, as it has been over the past three years in the whole of Europe and particularly in Britain—by 24 per cent. in real terms in the past year.
Objective (c) in the paragraph is
to stabilise markets".
I contend that market stabilisation has been achieved to a great extent by the fact that there has been surplus production.
Objective (d) is
to assure the availability of supplies".
There is no queston but that supplies have been available.
Objective (e) is
to ensure that supplies reach consumers at reasonable prices".


This depends, of course, on how one defines "reasonable". Many hon. Members may say that prices of agricultural products in Europe are too high for the consumer, but we have already seen that a fair standard of living for the agricultural community has not been achieved. The prices paid by the consumer have not increased in line with inflation or with other commodities. As has been pointed out, prices for agricultural products rose by 9 per cent. in the past year, whereas other prices rose by 14 per cent. and wages by 19 per cent. Those are the official figures. The hon. Member for Bradford, South seems to prefer to ignore the figures and merely to select statistics, as perhaps we all do.
The second part of article 39 is also interesting. It provides that
In working out the common agricltural policy and the special methods for its application, account shall be taken of:

(a) the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions."

I contend that that has, to a degree, been achieved, especially if we take account of the less favoured areas directive which is of such great benefit to hill and upland areas in Scotland, England and Wales, although I agree with the hon. Member for Londonderry (Mr. Ross) that Northern Ireland requires rather more. I also agree that we must be very careful about the disparity that the injection into Eire's farming economy will create and the effect that it will have upon agriculture in Northern Ireland and, indeed, the rest of Britain.
Paragraph (b) of the second part of article 39 refers to
the need to effect the appropriate adjustments by degrees".
That is thoroughly sensible. We should be seeking an evolved, constructively amended, agriculture policy.
Paragraph(c) refers to
the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole".
As has been said on many occasions, agriculture is a fundamental source of all true wealth. The continuing basic production that can come from agriculture has formed the basis of the economies of many countries in the world. We must not lose sight of this basic and important industry. [Hon. MEMBERS: "Hear, hear".] I accept the "Hear, hears" from behind me, although I am doubtful as to their source.
You will be pleased to hear, Mr. Deputy Speaker, that there is not time for me to go into detail on all the factors contributing to agricultural policy or to embark on a whole series of suggestions as to where economic solutions may be found.
I should, however, mention one or two areas in which there is much misunderstanding. Support prices are exactly what the term implies. They indicate the level to which the EEC will support the market. But that does not mean that the market price will be the same as the support price. The support price is only the base below which the market price should not fall if the support systems are working properly.
I cite an example to show how support and market prices are not mechanically linked. In 1975–76 the national support price for potatoes in the United Kingdom was £40 per tonne, but, due to scarcity, the market price to the consumer was more like £200 to £300 per tonne. It must be recognised that if the support price is set extravagantly

high there will certainly be overproduction, which will mean that embarrassing surpluses will be produced and taxpayers will be required to pay for their disposal unless export markets can be found. I see no reason why we should not look for export markets for agricultural produce at the cost of production.

Mr. John Carlisle: The hon. Gentleman talks about exporting surpluses. Let us take the example of the high support price of cereals. This means that we produce grain at far higher prices than the rest of the world. How can we export the goods that we produce, particularly cereals, without enormous subsidies having to be given to the grower against the world price?

Mr. Myles: If the hon. Gentleman had been patient a little longer, I would have dealt with that. I shall suggest that cereal prices should be reduced, which may please him.
I wish to speak of the consumer with regard to these surpluses. The taxpayer will have to pay if there are the surpluses, but the consumer will always benefit, because if there is a surplus the product will be cheaper than if there is no surplus. If there were no surplus butter there would be no butter subsidy. That is the truth.
Equally, if the support price is set extravagantly low, confidence among producers may be so eroded that they cease production of the commodity. Scarcity might then ensue, and no matter what action the Government took, prices to the consumer would certainly rise.
I hope that I have demonstrated that low support prices may cause higher prices for the consumer but that high support prices may produce lower prices for consumers. There is great difficulty in striking the correct balance. The variety of efficiency in agriculture throughout the Community contributes to this, as do variations in climate and the great differences in soil structure and fertility.
This huge problem must be tackled. We must ensure that those on rich land close to the markets do not cream off all the benefits so that those in remoter areas with poorer climates and soils are forced into bankruptcy. As I said earlier, the less favoured areas directive goes some way towards restoring the balance. Given the enormous dificulty which the CAP must face, rather than being condemnatory we should marvel at the advances which have been made, and which, given good will and co-operation, can continue to be made. It would be a tragedy if the achievements already secured were swept away on a tide of foolish nationalistic bickering.
Many people say that we should return to national financing. However, does anyone believe that national financing will maintan the support levels, even at the present low level, for home agriculture? That is amply demonstrated by the fact that even this Government, who are sympathetic to the problems of farmers——

Mr. Teddy Taylor: My hon. Friend does not trust the British.

Mr. Myles: I do not particularly trust my hon. Friend with regard to support for agriculture.

Mr. Taylor: Is my hon. Friend seriously saying that a British Parliament and a British Government would not give proper priority to the needs of agriculture?

Mr. Myles: I am certainly saying that, and I shall give an example to support that claim. Our own national support price for sheepmeat was 155p per kilogram, and


we are the largest producers of sheepmeat. When we entered the EEC we got a support price of 181p. per kilogram.

Mr. Geraint Howells: Perhaps I can help the hon. Gentleman. He is developing a good argument. Before we joined the Common Market, successive Governments supported British agriculture only twice in 25 years to help it recoup the cost of production.

Mr. Myles: I agree with the hon. Gentleman. As he has congratulated me, I congratulate him on putting his case so well.
There must be a common pricing policy as well as a sharing of the cost of that policy. That does not mean that policies on every commodity must be exactly the same in every country. The sheepmeat agreement is a good example of how a commodity can have common pricing without the same systems working in every country. I should like to see the same sort of systems for beef. Our variable premiums scheme is valuable in that it supports the market to an extent, although many argue not to a great enough extent. It does not deprive the consumer of cheaper meat when surpluses in the market occur.
There is also the suckler cow premium. If we support our agriculture to such a great extent, why do we not double up the £12.37 suckler cow premium as many other European countries are doing? That is another indication that the political pressures put on British Members of Parliament do not allow us to support our agriculture to the degree which is required.
The grain market is suitable for an intervention system. That would be a suitable way in which to support our grain growers. The support price for grain could be fixed rather lower in order to encourage livestock producers who rely to a great extent on secondary grain for livestock feeding products.
The greatest surpluses occur in the milk and milk products sector. It is also the sector in which the greatest difficulties occur in controlling those surpluses. It is a fallacy to say that the high input milk producers are inefficient. They can produce the cheapest milk. That can be seen from economic returns, which show that those who contribute the greatest input get the largest income margin. We must expose producers of milk surpluses to the cold wind of reality of competition in the market place, so that the Community's resources are not expended on disposing of these surpluses.
A super co-responsibility levy and quotas could be applied in that sector. However, we must be careful to ensure that if a super co-responsibility level is applied to all milk which goes for manufacture, some of our Continental partners do not increase their liquid milk production and export it to this country, thereby forcing milk into manufacture which will attract a super co-responsibility levy.
We must become more competitive and aggressive in our marketing, as the hon. Member for East Grinstead (Mr. Johnson Smith) pointed out. In that regard, I welcome the initiative and leadership shown by my right hon. Friend the Minister of Agriculture, Fisheries and Food and the other so-called "Marketeers", as well as the stimulation which they have given to the promotion and marketing of our own agriculture products, both at home and abroad. Every encouragement should be given to self-financing and to promotional and marketing projects. But

we must remember that they are not the same. Effective marketing implies a discipline in production. We must discover what the market wants and gear our production to fit demand.
I turn to the green pound. Perhaps the Minister will give the true position, following the recent currency changes in Europe. We at present enjoy positive MCAs—and I say "enjoy" deliberately. Every European country in which positive MCAs operate has fought to retain them in the interests of that country as a whole. It is entirely mythic al to suggest that if those MCAs were reduced artificially the British consumer would benefit. The European producers would accept with great delight the gift that we had put into their hands and would continue to sell on the British market at the same price.
The Opposition's solution appears to be to lower the value of the pound. Everyone knows that if this country were again so unfortunate and misguided as to elect a Labour Administration, the pound would almost certainly decrease in value. Back would come negative MCAs.
There was a lengthy article by the hon. Member for Edinburgh, East (Mr. Strang) in The Aberdeen Press and Journal. He said that a Labour Government would return to negative MCAs and would then devalue the green pound in order to help our farmers. It is strange that they did not do that when they were in power. Even if that were a solution, continuous devaluation of our currency cannot go on for ever. It is only a short-term expedient.

Mr. Nigel Spearing: I enjoyed some of the ingredients in the Scotch broth of the speech of the hon. Member for Banff (Mr. Myles), but they were too many and too varied for me to respond. At the start the hon. Gentleman referred to parrot cries from those of us who disagree with the CAP. I think that he will acquit me of being a parrot, just as I acquit him of being one.
As a farmer, the hon. Gentleman is in the CAP' s cage. The speeches by responsible Front Bench spokesmen on both sides of the House did not offer much hope or provide any solutions, because any United Kingdom Government would find themselves in that cage. It is no use the hon. Member for Banff talking about the merits of article 39. It does not give a full account of the agricultural policy that a country should try to create. Still less does it provide any guidelines or determinants for the method by which such a policy could be achieved. The problem with article 39 and the CAP is that principles, objectives and methods are in a hopeless jumble. They have never been worked out as a logical whole. Each country has put in the ingredients that it thinks will suit it. As a result, we have got the worst of most worlds.
There has been some discussion about the merits of a deficiency system. A Conservative Member said that if we were to return to it the Treasury would have to find £1,200 million a year to sustain it. Cmnd. 8187 is the Government's statement of our financial position as regards the EEC. It shows that apart from the Prime Minister's £600 million of supplementary measures, we contribute £1,335 million net. For that, we lose control of our agriculture.
Therefore, if we were not in the EEC considerable sums might be available to assist deficiency payments, which have the tremendous advantage of uniting the interests of producer and consumer. The method of intervention


buying and high prices divides the interests of town from country—producer from consumer. It divides the interests of the poorer consumer from those of the better-off.
The situation is even worse than that. Unfortunately, the hon. Member for Bodmin (Mr. Hicks) is not in the Chamber.

Mr. Myles: I do not quite understand why that discriminates between the better-off and the less well-off. I agree that a deficiency payment system equally subsidies the well-off and the poorer because of the amount of food they consume but I do not understand how the intervention system does.

Mr. Spearing: I am glad that the hon. Member has intervened, because I am afraid that he has shown his basic misunderstanding of the common agricultural policy from the consumer's point of view. A cheap food policy, which this country had until 1973, meant that people could benefit from world prices when they were low and farmers could benefit from higher prices when they were given deficiency payments. That is the best of both worlds. However, that meant that the proportion of income that a family was obliged to spend on food, especially basic food—not fancy, manufactured stuff—was lower than it otherwise would have been. That is incontrovertible.
The hon. Member for Bodmin noticed the growing acreage of cereals on his journeys to the West Country. I imagine that large areas of upland, such as Bodmin moor and parts of Devon and Cornwall—I see that other hon. Members from that part of the world are present—are probably being used for cereal production when they should not be. Thus, a common agricultural policy also prevents national Governments from inducing and encouraging the agriculture which is best for the natural conditions of their countries. It can encourage bad husbandry.
The "Annual Review of Agriculture 1981", Cmnd. 8132, contains some interesting figures on cereal production. It shows that the United Kingdom wheat production average in 1969 to 1971 was about 4 million tonnes. It is now 8 million tonnes. Barley production was at 8 million tonnes and is now at 10 million tonnes, nearly 6 million tonnes of which are fed to animals. Barley grown in this country, by and large, is not for human consumption. It goes for cattle feed. Thus, the trend mentioned by the hon. Member for Bodmin certainly exists.
Of equal importance is the disequilibrium in incomes which has been referred to particularly by the hon. Member for Londonderry (Mr. Ross). He may well say so, because the White Paper contains an extraordinary table—No. 24—showing the difference in percentages of farm incomes of different types between the seasons 1978–79 and 1979–80. They present an alarming and disturbing picture. In England the numbers of what are described as hill and upland cattle and sheep were reduced by 54 per cent., and of lowland cattle and sheep by 62 per cent. What is called general cropping—I take it that that includes arable crops and cereals—increased by 9 per cent. In Scotland "specialist dairy" decreased by 46 per cent. and "general dairy" by 56 per cent. and in Northern Ireland "mainly dairy" by 91 per cent. LFA cattle and sheep decreased by 77 per cent.
Those are serious figures. Either the sampling is badly adrift or things are much more serious for some farmers than even the NFU handouts would have us believe. Its figure is 24 per cent. generally.
I emphasise the great disequilibrium among different types of farmer. The present common agricultural policy is ill-suited not only to the consumers in the United Kingdom, but to the farmers. Instead of general policy being evolved by conversations outside and inside the House and finally being expressed in the annual price review produced by the Government for United Kingdom farmers and consumers in United Kingdom conditions, we have an imposed set of prices that are generally arbitrary and that apply in principle from Sicily to Shetland. Those are causing a disequilibrium in British agriculture that we should not have. It is against the interests of British farmers, just as it is against the interests of consumers.

Mr. Carlisle: The hon. Gentleman must realise that Common Market pricing allows revaluation for certain commodities. Not all commodities necessarily come under the same price. Surely he must realise that that mechanism exists; it may be one small advantage of the present system.

Mr. Spearing: I doubt that. The great anomaly of the Common Market, and especially the CAP, is that it begins with one principle—a common price and a common market for everything—then immediately decides that there must be exemptions because of certain conditions, because that man has a wooden leg or because someone has always been fishing in a certain place. In almost every sphere of the Common Market rules take account of the special conditions of this, that, or the other party. It ceases to be a common market and becomes an argument about exceptions and protections. Those arguments continue day after day, week after week and month after month. They sometimes escalate into the sort of position that now confronts the German and Canadian fisheries.
The hon. Gentleman said that we must balance grain and livestock prices. I understand that, but he is really saying that the CAP is unworkable and unsuited to the needs of our people. I am obliged to him. While it is possible for such a mechanism to be applied—I hope that the Minister will tell us why he thinks that it is not possible—the very fact that it is possible and that the hon. Gentleman is calling for it shows that the CAP is not suited either to agriculture or to the consumers.
My right hon. Friend the Member for Battersea, North (Mr. Jay) estimated that if we returned to world prices we could reduce our retail prices by between 15 and 20 per cent. He was challenged by one Conservative Member who said that we could not get all that reduction in the low world market. If we transferred what we now import from the EEC to imports from the world market, the proportionate increase in world purchases would be relatively small.
The effect is arguable, but let us consider some of the levies that we currently pay. A written answer to me on 19 March detailed the common wheat levy at £49 a tonne, maize at £46 a tonne, butter—other than New Zealand for which there is a reduced rate of levy—at 55p per pound and cheese, when we can obtain it, at 51p per pound. That is the measure of the difference between British and world prices. If the difference on which the levy is calculated is wrong, the levy itself is wrong and should be adjusted.
We need a British agriculture policy that suits the needs of both the consumers and the producers, wherever they are. Gradually, but slowly, people are realising that that is necessary. I am sorry to note that a group of people who have recently emerged in the House are too busy elsewhere to be here this evening. Among their 12-point programme they advocate the decentralisation of decision making. Yet every one of them now advocating decentralisation is advocating the adherence of Britain to the Treaty of Rome, and to the CAP in particular. They did not stand on such a belief in the general election of 1979. That was not part—any more than proportional representation was part—of the Labour Party manifesto. I cannot understand how those people can reconcile their view of decentralisation either with sending the powers of this House to Brussels and the Treaty of Rome or with the manifesto on which they were elected to the House.
There is only one real answer for both Front Benches. I appreciate their problems. They are wriggling about doing an impossible balancing act. The only way out for them, for British agriculture and for the British people, is to say to our friends in Europe, "We do not want the Treaty of Rome. We give you a year's notice that we are getting out. We do so in support of British ways, for Britain, and to suit the needs of consumers and producers alike".

Mr. Tony Speller: Today being Thursday, it is market day in South Molton, where the farmers of Exmoor come down. They will be interested in the remarks of the hon. Member for Newham, South (Mr. Spearing) about cereals. To the best of my knowledge, the only truly profitable serial on Exmoor is Lorna Doone. There are some occasions, as today, when those hon. Members on the periphery of the country speak, by and large, in favour of agriculture while those representing urban areas speak, by and large, in favour of consumerism, neither perhaps realising how much one depends on the other.
I am glad that the debate has revealed a community of interest in which all agree that agriculture in Britain is probably the most efficient of our industries. It is certainly the most efficient user of labour and machinery. It is recognised that farmers' real incomes have gone down considerably over past years while their indebtedness to the friendly bank manager has gone up. The end product, sooner or later, will be that one is out of business, and that will be a disaster.
Many more people than farmers live on the back of agriculture. One sees in the country areas a sad decline in firms selling plant and vehicles. There has also been a decline in the prosperity of a number of shops in small towns. Far from decentralising, people are shopping in large central areas. There is a strong tendency now for the farmer to sell out rather than to hand on the business. This is one of the more disturbing factors. The price of land has been so high for so long that the only method by which a farmer can get rid of the millstone of debt around his neck is to sell out. Farms are no longer passing to a son or a son-in-law or, indeed, to a daughter or a daughter-in-law. Increasingly the buyer is the bigger estate with the ready money and ability to pay. When this happens, something else good goes out of the small business sector.
I cannot pretend that I am able to offer any support whatever to the Government over the total increase in the petrol and diesel tax. It is the old business of the

countryside being penalised twice for being the countryside. One is penalised in the first place by the distance from the market, and one is penalised by the distance that one has to travel to work. It sometimes seems to us in the West Country that budgets are devised by centralised civil servants dealing perhaps with Ministers whose constituencies are far nearer the urban centres than the rural fastnesses. There is no doubt that the problems to be reaped in the countryside as a result of the changes in petrol and diesel tax will be far reaching and, in many cases, totally damning to the future of small firms and to the man who drives long distances and has to spend relatively more on petrol because he cannot afford a new Mini Metro and has to rely on an old banger. He is driving 30 or 40 miles further than the town man and therefore faces increased costs.
My hon. Friend the Member for Banff (Mr. Myles) talked about article 39. Like so much of the Treaty of Rome, article 39 is perfect in principle but imperfect in practice. The strangest and saddest factor is that all can agree about the truth, beauty and goodness of article 39, but this is not enough. As one of the men, rightly or wrongly, in the centre on this issue, I tend to divide the extremists on both sides of the House into Euro-nuts and Euro-bolts. To the Euro-nut, everything in Europe i s Wunderbar and the hills are alive with the sound of music. To the Euro-bolt, on the other hand, the hills are mountains and the mountains are the products in surplus. Whether the surplus would last a week, a month or any longer is immaterial. If it can be called a mountain, it must be bad. I would rather have a mountain of food at my door than empty stomachs inside.
Here again is the problem of the farming world appearing to be at variance with the consumer. Farmers must eat as well, and so must their families, and many people are able to eat only because of the agriculture industry.
Can we ever make a system work when everyone seems to cheat? If I ask a sheep farmer at South Molton market what he thinks of the French, the answer comes in unparliamentary language. If a French milk producer is asked what he thinks of the British, the same applies, as it would if a British horticulturist were asked what he thought about the Dutch subsidised fuel. I wonder how long it will be before we totally revise our CAP. I am not saying that we should remove ourselves from Europe, but years ago I worked overseas for produce marketing hoards which operated over several countries in West Africa with different languages and very primitive communications. It occurs to me that perhaps we could remove the individual, petty, nationalist in-fighting over products by introducing, let us say, a European sheepmeat marketing board which marketed all the available produce of acceptable quality not just in the EEC but in the world. The world is a bigger market than is the EEC, and there must be benefits in being able to use both. I know not whether this is a possible or could ever be a popular theory, but if we continue fighting our way trench by trench—the battle of the Somme, the battle of the bulge, always a new battle—our CAP will get nowhere and sooner or later the EEC, which in principle is perfect, will fall to pieces.
We have peace through the EEC; we do not necessarily have prosperity, but we should have. Grinding my own parochial axe, I cannot say other than that the prosperity of a most efficient industry—agriculture—must be safeguarded. To do irreparable damage to it or to destroy


it in the name of consumerism may or may not be of some short-term advantage to our country. It would be long-term madness and we could be held to ransom when the lean years come; rather a surplus, even a big surplus, than the smallest of deficits in food.

Mr. Teddy Taylor: If the common agricultural policy as it now is and its basic principles are regarded as immovable the Commission's proposals are reasonable and sensible. The Commission is saying, "Let us contain the price rises and the growth of further surpluses and make sure that we do not make the CAP a great deal worse." Unfortunately, even these modest proposals will almost certainly be exceeded at the Council of Ministers. Prices will be larger than the maximum that can be afforded and various dodges will be adopted whereby States will pay a bit extra. The Minister must surely accept that the problems of the CAP will be worse a year from now because of what will almost certainly happen at the Council of Ministers. If we accept the Commission's proposals, things will just be about the same.
My hon. Friend the Member for Banff (Mr. Myles) is the first speaker in my memory who has called for some agricultural prices to be lowered. That is a wonderful gesture towards reasonableness and flexibity, which I shall try to follow. I think everyone in his right mind must accept that in principle the CAP is nonsense. It is evil, and immoral, and in the long term it is bad for British agriculture and the British consumer. We know from the published figures that the consumers pay a great deal more than they would have to pay under a deficiency payment system. No one could argue to the contrary.
We also know that if we decided to leave the prices exactly as they are and instead of having deficiency payments had our own levies, which would go to our own Chancellor instead of into the European coffers, we should have a great deal more money to spend on welfare or reductions of tax. Financially the policy is nonsense, Of course we heard from the Minister of Agriculture that the average cost to the consumer is about £5 per week per family—or £3,000 million per year.
The second thing which the CAP does, which has not been mentioned much, is to reduce the amount of goods consumed. If hon. Members will look at Hansard for 15 December 1980, at col. 57, they will see a most revealing answer given to me by the Minister of State, in which he outlined what has happened to the consumption of food since 1960. He gave the latest figures of consumption for beef, lamb, butter and milk, which showed that the average consumer in Britain is consuming much less milk, butter, lamb and beef. There is little doubt, therefore, that the CAP reduces demand, reduces the amount of food eaten.
For milk, the latest figure is 4·24 pints a week and in 1960 it was 4·84; for butter, it used to be almost 6oz; now it is just over 4oz—a dramatic fall in consumption.
A crazy situation is created when we have to send vast surpluses of food to the Soviet Union and elsewhere. It has been mentioned today that the amount of butter which we have sent to Russia since the invasion of Afghanistan is much greater than the amount sent in the previous year. I think that hon. Members might wish to look at Hansard

for 8 December, where they will see that it is not just butter. Our exports of wheat, barley, flour, malt, butter, butter oil, beef, pigmeat and poultrymeat to the Soviet Union last year were greater than they had been the previous year, despite the invasion of Afghanistan.

Mr. Nicholas Winterton: At what price?

Mr. Taylor: We sold butter in the early part of the year at 31p per lb but, sadly, the Soviet consumers did not get it at that price. They had to pay the equivalent of about £1·20 per lb, which means an enormous profit is going to the Soviet Government which can be used to help finance the invasion of Afghanistan or the other nefarious purposes of Soviet aggression which my hon. Friend the Member for Aberdeen, South (Mr. Sproat) rightly condemns. I know that I have his full support in condemning the shameful practice of sending these surpluses of food at knockdown prices to prop up the vicious Soviet regime.
This applies not just to food. One hon. Member sitting here, whom I will not name, will be interested to know what happens to wine. It is appalling that last year, after the invasion of Afghanistan, we sent 149,026,300 litres of wine to the Soviet Union at a knockdown price and gave £9 million in subsidy. This is not a fabrication from the Sunday press; it is a helpful answer given to me by the Minister of State. I wonder how many of our ordinary people in this country, how many of our pensioners who are finding it difficult to pay the present price of food, are aware that they have paid to provide the equivalent of 1½ bottles of wine for every single Soviet family at a knockdown subsidised price since the invasion of Afghanistan
.
We can blame the Commissioners, but it is certainly not their fault. They are landed with the enormous surpluses because, unfortunately, the Council of Ministers cannot reform or change the CAP. Even when the Commission pleads with them for minimum price restraint to ensure reasonable prices, the Ministers ignore them and put the prices well above what the Commission recommends.
I think we condemn the Commission far too readily and do not condemn the Parliaments of the member States for not agreeing to support the Commission when it is trying to be reasonable and to contain the situation.
I want to ask the Minister a simple question. Everybody talks about reform. Everyone says that we must reform the CAP. Those who are supporters or opponents, those who do not believe in the EEC, all say that we should reform the CAP. I want to ask the Minister in what direction we should reform it. People are happy to say that we must get rid of all these surpluses, but I want to know how they would get rid of them. As long as production is rising and consumption is falling because of high prices, there is no way in which we can abolish the surpluses, unless we sink them in the deep blue sea.
What we must not do is carry out the shameful policy of undermining the poorest countries in the world by undercutting them in the world market by dumping food at knockdown prices. It is pathetic and almost horrifying that some of those who write long reports about the need to help underdeveloped countries positively encourage the EEC to dump food at knockdown prices which are ruining the poorest countries. The countries which produce sugar are being ruined by the dumping of surpluses at knockdown prices. That is shameful and wrong.
How are we to achieve reform? Some people have said that we should freeze the prices of products which are in


surplus. A year ago everyone seemed to acept that that was sensible. But what has happened this year? Only 12 months have passed and it seems to be generally accepted that we will be putting up prices again, so the surpluses will probably grow. All the experience over the last five years has shown clearly that there is little prospect of a major reform of the CAP which would be acceptable to all member States and which would solve the basic problems.
When there is so much pressure from agriculture we have the clear choice of going ahead as we are doing, getting deeper and deeper into trouble, or trying to replace the CAP with national policies within the framework of article 39 which can be carried out under the general supervision of the Commission. Some people say that that would be the end of the EEC. Of course, it would not. Article 39 simply states broad principles of working for the good of agriculture, consumers, and so on. We could have national policies which were in harmony with article 39.
We will have to do this. There will be pressure from the agricultural community in one, two or perhaps three years. I do not deny that agriculture in general in Britain has benefited from the EEC so far. There have been price rises to bring us up to European levels. We have had the green pound, and now the positive green pound. Compared with other industries agriculture has done well despite the reduction in income this year.
Looking to the future, British agriculture will find it difficult to get within the CAP the price rises which it claims are necessary. When prices are put up, appalling structural and financial problems are created for the CAP. It creates vast surpluses and many other problems. There will be pressure not just from the consumers; there will shortly be substantial pressure from the farming community, who will say, "We no longer like the CAP because it is stopping us getting the price rises we want."
The problems of British agriculture can be coped with by the British Government on their own. It will be impossible to solve the long-term problems of agriculture and, indeed, of the consumer unless we operate on a national basis, by all means in co-operation with other member States of the EEC. The CAP has got to go. The debate today has shown that we have a costly, bureaucratic piece of nonsense which will continue to get worse and worse because of political pressures and because of the activities of the Council of Ministers. The only conclusion from today's debate is that some time soon the CAP will have to go.

Mr. Tony Marlow: I should like to start by following the point made by the hon. Member for Newham, South (Mr. Spearing). I am surprised that the Jenkinsites, the members of the new party so-called, whose only policy that has been identified by the whole country is that of slavish support for the Common Market—have not been here for this important debate about the common agricultural policy. Not one of them has been seen in the House throughout the whole debate. It is a matter of great regret and disgrace.
Most hon. Members on the Conservative Benches, except my hon. Friend the Member for Southend, East (Mr. Taylor), have come from agricultural constituencies and quite rightly have put forward points from the farmer's point of view. I know that I take a line on the common agricultural policy that would frighten many people with farming interests, but may I just say that I am speaking as

somebody who over the last couple of years has probably lost more on livestock than most compulsive gamblers lose on horses in a lifetime? So I appreciate the problems.
My constituency has, I think, at the most two farms in it, so I am sure that the House will forgive me if I look at this matter from the point of view of the consumer. I am not as concerned as my hon. Friend the Member for Banff (Mr. Myles) for the CAP, which he rather looked upon as a damsel in distress which we should do what we could to help and assist. I am looking at this purely from the point of view of national interest.
I hesitate to bandy statistics with my right hon. Friend, because his skill in their selective use makes a senior wrangler look like a playschool novice, but it is important to take a statistical snapshot of the CAP and its cost to the United Kingdom.
My hon. Friend the Member for Southend, East told us that he has had an answer from the Minister saying that the cost to the consumer in the United Kingdom is about £3,000 million a year. Whenever that is said, my right hon. Friend replies by saying that it of course assumes that world prices remain the same and that if we were not in the CAP they would not stay the same. But why not? Europe would continue to churn out the surpluses that it does now. People would not eat any more or any less, and there would be no less supply or demand. It is just that the food coming from Europe would be at world market prices rather than at the current very high CAP prices.

Mr. Peter Mills: What about sugar?

Mr. Marlow: My hon. Friend mentioned sugar. There are former Commonwealth countries that would be only too happy to have long-term contracts with this country to provide sugar at well below the present CAP prices. That would bring benefit to them, to us, and to our trade and manufacturing industry, and would build up the industries in those countries. It is a great shame that we can no longer do that.

Mrs. Elaine Kellett-Bowman: They broke the contracts in 1974.

Mr. Marlow: The hon. Lady can make her own speech later if she wishes. There is another way of considering the cost of the CAP to Britain, and that is to look at it the other way round. Let us consider the position of France. In 1979 the French sold within Europe some £3,000 million net worth of agricultural commodities. Those sales were made at an average price that was twice the world market price. So, there was a benefit to France, over and above anything coming through the budget, of £1,500 million in one year. That is an indication of the vested interest that the French have in the continuation of the CAP as it is at present.
In 1979 the CAP took up 80 per cent. of the Community budget. From the Community budget, over the past three years, for every pound that Britain put in she got back 49p—a very poor rate of exchange. Last year, despite the magnificent victory of my right hon. Friend the Prime Minister, we disbursed into the budget £705 million net. The farmers in the House might be interested to know that with that sort of money we could take 15p off the price of petrol
As I said, the CAP takes 80 per cent. of the budget, and two-thirds of that 80 per cent. is spent on the disposal of surpluses. One-half of all the money sent to the


Community—£1 in every £2 that we spend in Europe—is spent on the disposal of surpluses of milk and beef—a sacred cow, if there ever was one.
The basic problem for this country is that the CAP, as arranged at present, is a high-price system, and we are net importers of foodstuffs. That means that we not only pay high prices to our own farmers, which I do not resent because farmers are very important people in our economy, but we pay high prices to Continental farmers. We are sending that money across the exchanges, over and above the cost of the European budget. That message must be driven home to our people. Anyone who has the interests of our country at heart should make sure that everyone in this country realises that we are not only paying through the nose into the Community budget but are paying to fatten up the French farmer, the Dutch farmer, and the Irish and the Danish farmer. The money spent in that way is in fact more than we are spending through the Community budget. The fact is not sufficiently well known.
My hon. Friend the Member for Southend, East said how difficult it would be to reform the CAP. The obverse of that is that the vested interests of the other countries of Europe who are getting our money in this way will make it very difficult for us to prevail upon them to vary the CAP.
Given those facts it is hardly surprising that there is a large and growing movement within the Conservative Party for massive reforms of agriculture arrangements in Europe. Different arrangements are needed. We need different arrangements with the interests of the United Kingdom at heart. The current arrangements do not have the interests of the United Kingdom in mind to the slightest degree.
Our farmers produce 60 per cent. of the temperate foodstuffs that we eat in Britain. They need support. I am fully in favour of that. But we must also bear in mind the requirements and interests of consumers.
Let us examine some prices. In the middle of last year the consumer in the United Kingdom was paying twice the world market price for barley, three times the world market price for beef and four times the world market price for butter. If that is not a scandal, I cannot think of one.
The Commission's proposal is for a general level of price increases of 7·9 per cent. and a 5 per cent. devaluation of the green pound. As my right hon. Friend the Minister said, that would mean an increase of 1·4 per cent. in farm incomes. I agree that that would be inadequate.
On the other hand, given the prices that I have just set out, it is intolerable that there should be any increases at all in European price levels. We can help our farmers in a different way. There is no justification for any price increases.
I shall bring a couple of brief factors into the open. First, I shall deal with MCAs. This year so far we have had average MCAs of 15 per cent. I received an answer from the Minister of Agriculture, Fisheries and Food. I shall extrapolate from it. I shall not read it, because it would take too much time. I accept that it has certain provisos. It is not an accurate answer and my right hon. Friend does not expect it to be. MCAs at 15 per cent. For

a whole year are costing us, over and above the budget which has been renegotiated, between £45 million and £210 million a year extra.
We need not have put up the price of derv in the Budget. To earn £45 million we needed to put up the price of whisky not by 60p but by 15p. It is our money and it is going down the drain.
My hon. Friend the Member for Southend, East and others mentioned article 39. Let us examine it. It says nothing about MCAs. It says nothing about threshold prices. It says nothing about forcing our consumers to pay twice as much as the world price for their food.
I recommend my right hon. Friend to do some fairly simple things. I am sure that he will be keen to do them. First, he should fight for Britain and not for Europe. Secondly, he should remember that he is Minister of Food as well as of Agriculture.
As a forerunner to the radical reform of the CAP—without which our membership of Europe is as much use to the United Kingdom economy as a lead weight on each foot—my right hon. Friend should do three things. First, he should demand a price freeze. Secondly, he should have an immediate and full revaluation of the green pound. That would save up to £210 million for the British taxpayer each year. Thirdly, he should, as the French do in providing £400 million a year, provide the direct agriculture support for our farmers that they need and that the House would support.
In that way the agriculture support for our farmers would be maintained without forcing our housewives to maintain the support of Continental farmers. In that way food prices would drop, inflation would drop, and there would be a £400 million saving to the consumer, which would more than cover one and a half times the amount that we would have to spend on farm support. There would be a saving of up to £210 million in budget contributions. That would have a beneficial effect on interest rates. It would leave more money within the country to spend on industrial activity. Because there would be more industrial activity interest rates would come down and unemployment would be reduced. We are trying to achieve all that. That would be the first stage in a long haul to get a fair deal. I am sure that my right hon. Friend, on reflection and on thinking about my argument, will be pleased to do that.

Mr. Robin Maxwell-Hyslop: It is necessary to recite some of the more alarming facts about the income of British agriculture because they are less widely known than they should be. These facts have implications for the level of economic activity in the engineering and chemical industries beyond agricultural areas.
Between 1976 and 1980 net farming income decreased by 21 per cent.—from £1,282 million to £1,025 million. Interest payments in the same period increased by 230 per cent.—from £139 million to £460 million. Total borrowing increased by 186 per cent.—from £1,109 million to £3,171 million. Those figures are bad enough when they are spread over the entire industry, but they are not spread in that way.
The section of the industry that borrowed is basically the one which went in for expansion programmes with the blessing of the national agricultural advisory service. It received grants from the Ministry of Agriculture, Fisheries and Food for so doing because it was believed to be compatible with the national interest.
I remind my colleagues that if they go to the Library to read the Agriculture Act 1947 they will find that section 1 has not been repealed or amended. That section sets out the basis of statutorily guaranteed Government policy towards the industry. According to the Library copy—Library copies are always amended to bring them up to date—it has not been amended by subsequent legislation, including the European Communities Act 1972. It still stands on the statute book in the form devised by Tom Williams when he was the Minister of Agriculture and Fisheries in the Labour Government. It has since been reinforced, if that is the right expression, by a series of White Papers, such as "Food from Our Own Resources". The only trouble is that the finance for carrying out the self-declared policies that appear in the Act has never been provided.
The reason why borrowing has increased by 186 per cent. in the past four years is undoubtedly in large measure an inability to pay the interest on existing borrowing. There has been an accretion to the capital borrowed. A section of the industry—one cannot know what proportion of the total, but it might be one-quarter of it—is now so much in debt that it looks as if whatever happens to interest rates, however low a level they may reach, the net income in future will be insufficient to write down its debts and will be sufficient only to service them. This could be a permanent indebtedness.
Naturally the section of the industry concerned asks why it is that British Leyland, the computer industry and other industries can have their debts written off at the taxpayers' expense while agriculture, the fair return for whose labour, investment and family labour is warranted in section 1 of the 1947 Act, has been brought to its present condition by, first, the failure of the Labour Government to devalue the green pound when they should have done, thereby generating a gross shortfall in income—which has necessarily resulted in borrowing money that it should never have been necessary to borrow—and, secondly, the high interest rates over the past couple of years.
I do not intend, in an agriculture debate, to go into the reasons for those high interest rates, although I am satisfied that the greatest single cause has been the wholesale nationalisation policy of successive Labour Governments, for which the taxpayer now must pay. Nationalisation policies were also carried out when the Liberal Party was keeping the Labour Government in office after they had lost their parliamentary majority. After the Lib-Lab pact was announced in 1977, five industries were nationalised. We now have the pleasure of paying for the shipbuilding industry, which was nationalised while the Liberals were keeping the Labour Government in office.
That immense drain on public funds has been the principal cause in forcing up interest rates, from which agriculture has suffered severely, as have other industries. Together with my hon. Friend the Member for Devon (Mr. Mills), who made such a distinguished speech at the opening of the Back Benchers' contributions to the debate, I do not believe that the indebtedness of this section of the industry, be it at 20 or 30 per cent., can be cured by its own income generation in the future. The sooner that is recognised, the better.
The horticulture side is often ignored in agriculture debates. The Dutch are persisting in subsidising their glasshouse industry after such subsidies have been ruled unlawful by the courts of the EEC as well as by the

Commission. That highlights the difference between what the Treaty of Rome says and what happens, to which many of my hon. Friends have drawn attention.
That is exemplified in the poultry industry. In Britain, high costs are imposed on our poultry producers and packers by the EEC hygiene regulations, which are not enforced on the Continent. In French packing stations one can see the ashtrays which are fixed to the machines for the use of those who man them when smoking is supposed to be forbidden. In the egg packing stations, the inspection cubicles may be unmanned. The eggs are sent out without anyone inspecting them. Yet, in theory, they have conformed to the necessary EEC regulations.
Experience shows that it is impractical to make the EEC enforce its regulations in countries where regulations are never enforced anyway. Greece is another country where the mechanisms of government do not exist to enforce regulations on hygiene or anything else. Therefore, we shall have to reverse the path of the EEC and do away with those inspection regulations, relying on the commercial good sense and integrity of our own firms and relieving them of costs which they cannot bear in competition with other countries which do not enforce the same regulations. That is the path down which we shall have to go.
Therefore, if we consider the EEC in terms of giving domestic assistance where exterior factors have rendered our industry uncompetitive—our industry is not responsible for the interest rates which have tortured it—if our packing stations are free from the EEC hygiene requirements, and if we arrange, by remission of duty or by subsidy, for our glasshouse industry to be able to obtain energy at the same price as the Dutch until the enforcement mechanisms of the EEC prove effective, we shall have the true competition between producers in the member countries which is enshrined in the Treaty of Rome.

Mr. Nicholas Winterton: The debate is weighty and important I am delighted to see the Secretary of State and the Minister of State in their places for what I hope will be a rousing conclusion.
I have never known my farmers so angry and concerned. On Saturday morning I attended a special meeting requested by my NFU. Having spoken in Gainsborough on Friday evening, I rushed back to be greeted by farmers not only from my constituency but from over the border in Derbyshire, Staffordshire and parts of Greater Manchester.
For the first time in my 10 years in the House my Cheshire NFU has issued what I can only describe as a panic document relating to the 1981–82 EEC farm price proposals. The House will therefore appreciate how strongly my dairy and livestock farmers feel about the situation. The document is headed:
Don't let them sell out Cheshire farming.
Three of the major points that it makes are:
Can you afford to have your milk cheque reduced by 6p in the pound?
Do you know that the revaluation of the green pound could take a further 25 to 30 per cent. of your income?
United Kingdom farmers have a worse income position than anywhere else in Europe, except Denmark—the proposed Euro-package will make the position worse!
The document has been posted through many doors in Cheshire, so that members of the public have been made aware of the situation.
My right hon. Friend has resolved some of the queries in my mind, and will have pleased my dairy farmers by much of what he said, particularly that he would be prepared, if necessary, in the interests of Britain and the British farmer, to use his veto in the Council of Ministers. My farmers will be greatly reassured.
The meeting on Saturday lasted for about 2½ hours. One dairy and potato farmer in the village of Siddington, outside Macclesfield, reported an overdraft £20,000 up on last year's figure. Another leading officer of my NFU reported that if he did not reduce his overdraft during the next year the bank would foreclose. In a letter that he subsequently sent to me he stated:
As you know, five years ago we made a large investment to make our farm efficient. By now that investment, plus hard work, should have started to pay. In fact, our income has gone down and our overdraft has increased.
If the new prices are ratified we will get less cash next year. Our input prices are and will go higher and our loss will be greater. Our answer is to cut all spending on repairs and improvements, to reduce the breeding herd. This will mean less trade for other industries and dearer food for the consumer.
May I remind you that the wealth of this country is in the land. If farmers go bankrupt, so will the country.
He could not have put it better. I am delighted to see my right hon. Friend the Minister nodding his head. Our farmers produce a commodity that the people need, which is perhaps much more important than coal, steel or the other industries that receive generous handouts from the Government. We cannot live without food. The letter accurately reflects the concern of the dairy industry.
Another farmer reported his profits down £4,000 from the 1979–80 figure. The county chairman, Mr. Geoff Morris, who happened to be at the meeting, reinforced the views of my farmers and those from adjoining areas. He said that the tax adviser to the NFU in Cheshire reported that at least 30 per cent. of his dairy farming clients had used the two-year tax average in 1980 as against hardly any the previous year, indicating a drop in profits of at least 30 per cent. That shows clearly the serious position that we face.
I now quote briefly from a letter sent out by the chairman of the NFU in Cheshire:
As the elected leader of Cheshire farmers I write seeking your support to prevent the farmers of this county being forced into bankruptcy unless the levels of EEC farm prices now being discussed are significantly improved.
I do not use the word 'bankruptcy' lightly. Official data"—
and this data was provided by the Ministry itself—
clearly spells out the precarious plight in which our farmers and growers find themselves. Just look at a few of the facts: Over the last full farming year our incomes fell by 10 per cent.—or an even more alarming 25 per cent. when measured in real money terms.
I am quoting here from people who are actually in farming and should know the position for themselves. It is vital to put this on record so that the Government know how strongly people feel. Mr. Morris continued:
Because of this and the long-term nature of farming operations our indebtedness to the banks and other finance houses reached the highest level ever—and much of this was disaster borrowing.
Glaring gaps are also beginning to appear in our breeding herds and this is an ominous sign and one which will affect the pockets of consumers unless the growing crisis of confidence on Cheshire farms is reversed.
You might well say that other industries are also in difficulties"—
indeed, we know that they are—

which we do not dispute. But what I have to point out is that agriculture's crisis started several years ago and has deteriorated to such an extent that by 1980 the total decline in own real income had been down by more than half over four years. Input prices i.e. what we pay for goods and services, soared by 92 per cent. over the past five years whilst our farmgate returns rose by only 58 per cent.
This matter was highlighted by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop).
I summarise the points quickly. I am speaking for my farmers in Cheshire and the North-West, and the dairy and livestock industry in particular. First, the industry in Cheshire is in the first stages of what I and they consider to be a serious decline. It is not particularly due to the present recession or the recent high interest rates, but to the simple fact that costs have risen at a much higher rate than returns over a period of years. Income has therefore dropped by an increasing rate and bank borrowings, to give a figure provided by the National Westminster Bank, have increased by £2,500 million to more than £3,000 million in one year. That is a dramatic statistic. Moreover, 50 per cent. of farm income now goes towards interest payments, compared with only 11 per cent. 10 years ago.
With reference to the Minister's use of slaughtering figures when I asked his him a question last week, the NFU and I consider that this was a rather unfair comparision to draw. It is my view and, I believe, that of farmers that it would be far better if he and his Department looked at the accounts of some of the farms in the area to assess the problems faced by dairy and livestock producers at this time. If he referred to Murray Smith and Company, chartered accountants, of Northwich, in Cheshire, they would gladly supply him with details of the drop in incomes of many of their clients who are my constituents.
Secondly, it follows that a substantial rise in farm prices is required, with no revaluation of the green pound—and I am delighted that my right hon. Friend indicated that he would not support such a revaluation—to offset the benefit of a rise to United Kingdom farmers. Any further co-responsibility levy must apply only to those countries which increase their surplus commodity production.
Thirdly—and I say this with every emphasis that I can muster—the national help given to other members States must be either stopped or matched by our own Government.
Fourthly, the point has been made that there is increasing resentment that other member States in the Community seem to show more determination in looking after their farmers' interests than apparently the Government have shown for farmers in the United Kingdom.
I have been reassured by many of the comments made by my right hon. Friend the Minister. He has said time and again that he is keen on promoting good marketing, but if we cannot secure fair competition within the Community surely we shall lose our own market by default. The most glaring example, which has been quoted several times in the debate, is that of the problems in the horticulture industry and the way in which the Dutch subsidise their heating costs.
I know that another of my hon. Friends wants to participate in the debate, so I shall conclude. My right hon. Friend is doing an extremely good job in difficult circumstances. I was appreciative of the amount of work that he put into preparing what he said today. I shall be happy to send a copy of that speech, with my limited remarks, to the many farmers who attended the meeting


in my constituency on Saturday, many of them missing the first half of the rugby international in the afternoon as a result. I know that much of their concern will have been laid to rest by my right hon. Friend's speech.

Mr. Nicholas Baker: I am grateful to you, Mr. Deputy Speaker, for allowing me to intervene briefly. I am also grateful to my hon. Friend the Member for Macclesfield (Mr. Winterton) for giving me the opportunity to do so.
I shall confine my remarks to one of the points that I wanted to make. In the last two weeks, for the first time in my political experience so far, farmers have presented me with their accounts. Even allowing for the limitation of written accounts, they revealed a serious picture. My concern is that our small farms are threatened. No doubt those farmers will have been relieved by what my right hon. Friend has said.
I have looked at the typical milk enterprise of between 150 and 250 acres which exists in my constituency and, no doubt, the constituency of my hon. Friend the Member for Devon, West (Mr. Mills). People in that sector are efficient. They are not contributing to a surplus. However, their future is threatened. Their land cannot be used for any other type of fanning except beef production, and the few people who have tried that have found themselves in even worse straits.
The picture is just as serious for the pig producer. He is efficient. But even where the food conversion ratios are at the top level of efficiency, his profitability is down to zero. In fact, 4·4 per cent. profit is relatively good, even before taking account of any interest payments. A pigmeat processor in my constituency—Case and Sons, near Gillingham—has persuaded its suppliers to take reduced prices in order to keep the factory going. That is a small but viable and efficient factory.
Small businesses are important to rural communities, because all the other facets of rural life depend on them. I know that they will take heart from what my right hon. Friend said today.

Mr. Gavin Strang: We have had a constructive debate. In general, hon. Members have addressed themselves to the price proposals but have not lost sight of the fact that nowadays this is the only agriculture debate of the parliamentary year. That certainly applies to the last four or five years. It is therefore right for hon. Members to take the opportunity to raise some of the real issues which are now affecting British agriculture.
There have been quite a few changes in the situation since we last had a debate of this nature almost exactly a year ago, but I regret to say that the one thing that has remained constant is the enormous cost of the CAP. We must not lose sight of that. Some hon. Members were clearly a little irritated by some of the remarks made by my hon. Friend the Member for Newham, South (Mr. Spearing) and the hon. Members for Southend, East (Mr. Taylor) and Northampton, North (Mr. Marlow). However, the cost of the CAP is rising inexorably. It represents a massive misuse of resources. Let us take the milk sector. How can we justify the fact that last year about £3,000

million was spent on the milk regime alone? That is about 30 per cent. not of expenditure on agriculture but of total Community expenditure.
Since we last debated the price proposals from the Commission there have been a number of important changes. In terms of the effect of the CAP on the United Kingdom, the most important change has been the development of positive United Kingdom MCAs as a result of sterling's appreciation. For the first time since the Corn Laws of the nineteenth century we are imposing taxes on food imports from Europe. It does not make economic sense for us to apply such taxes. We are a net food importing nation. The taxes do not even go into the British Treasury. They increase our net contribution to the Community budget, thus offsetting the improvement that the Prime Minister achieved last year.

Mr. Peter Walker: When the hon. Gentleman says that it makes no sense to have such a tax, does he mean that the Opposition think that there should be a revaluation of the green pound so that the position is neutral?

Mr. Strang: I am grateful to the right hon. Gentleman for that intervention, because he has anticipated the point that I was about to make. I intend to address myself to that issue. In principle, we are opposed to positive MCAs, but we recognise that, given the present state of British agriculture, it would be irresponsible to eliminate MCAs overnight.

Mr. Peter Walker: How much?

Mr. Strang: The right hon. Gentleman did not tell us how much. He did not give any estimate of the size of revaluation that the British Government intend to accept in the negotiations. The right hon. Gentleman said that he opposed a massive revaluation. I did not understand the Minister to say that the British position was one of opposition to any adjustment of the MCAs or to any revaluation of the green pound regardless of the common price increase ultimately reached.
The revaluation must be judged against the final settlement in terms of price increases. More important, the problems of British agriculture should be tackled by national measures. Regardless of what revaluation the right hon. Gentleman manages to avoid, the state of British agriculture means that we must introduce a package of national measures.
Since we debated these issues last year there has been a major change. There has been a decline in the profitabiity of British agriculture. It is almost impossible to exaggerate the position. Several hon. Members referred to it. However, taken as a whole, the speeches of Conservative Members—particularly the speech of the Minister—did not reflect the gravity of the crisis facing British agriculture. Agricultural incomes were down 24 per cent., in real terms in 1980—the fourth successive fall in four years. The livestock sector is in real trouble. The agriculture industry buys about £6,000 million worth of goods from the rest of the British economy. A massive decline in its profitability and a cutback in investment in plant and machinery have had a serious effect on other industries. Agricultural implement firms are going into liquidation. Thousands of workers are being put on the dole as a result of a reduction in demand for tractors and the lack of investment in new machinery. The state of British agriculture must be addressed more decisively than it has to date.
I shall refer briefly to some of the more important commodities. First, production of milk, which is still our most important agricultural commodity, rose sharply in the second half of the 1970s. It is now static, at best. We are opposed to all levies. We believe that we should hold down common prices for products in structural surplus. It does not make sense to apply levies, because the history of the Community shows that in practice the price increase is adjusted upwards to offset the cost of the levy. My fear is that levies swell the Community budget indirectly and have the effect of reducing consumption of those products because prices are increased.
In the dairy industry the position is serious. The failure of the Government to take advantage of the £125 million which is available from the Community for a subsidised milk scheme in our schools is little short of a national scandal. It is no use Ministers telling us how much they are concerned about the milk sector when the consumption of milk in our schools has declined so drastically. In 1979–80 the figure was as low as 90 million litres. If we go back far enough we find that there was a time when we consumed more than 200 million litres of milk in our schools. Why is it that 70 per cent. of schoolchildren in Denmark can obtain EEC-subsidised free school milk? The United Kingdom is pursuing policies which prevent its taking advantage of EEC money and which add to the difficulties of its dairy sector.
On the subject of levies, can the levy on the A sugar quota still be reopened in these negotiations? I accept that there is no capital to be made from either side of the House on sugar. I remember when I sat in the Council of Agriculture Ministers seeking an EEC subsidy for imports of sugar because of the serious world shortage of sugar at the time. I agree the outlook for the sugar regime is likely to be one of surplus and continuing cost to the Community.
I want to raise the major issue of the closure of the Tate and Lyle refinery. The impression given by the Prime Minister when she met a large deputation from Liverpool was that she was genuinely concerned about the social consequences of the closure. I hope that Agriculture Ministers are not dragging their feet on any attempt to save that refinery. A package could be produced, with possible help from the EEC and certain help from the unions, the company and the Government, to keep the refinery in production. It would be a scandal if it were allowed to close when unemployment in Liverpool has reached such an intolerable level. My hon. Friend the Member for Liverpool, Scotland Exchange (Mr. Parry) would have made that point had he not been unavoidably absent through illness.
I followed with interest the Minister's remarks about beef. It is unsatisfactory that each year we have to renegotiate the variable beef premium. We know that the Commission excludes the premium from its proposals as a bargaining counter so that Ministers have to exhaust negotiating capital in restoring it. I hope that the Government will insist that the variable premium becomes a permanent element of the beef regime. It should be wholly financed by the Community while intervention buying is wholly financed.
I do not advocate illegal national measures to help the agriculture industry. Perhaps the French package of £350 million is illegal under the Treaty of Rome. There is enormous scope for production aids to the industry—for

example, an energy subsidy for our glasshouse growers. The Commission said that that would be acceptable. We could increase the beef suckler cow premium. We could reverse the cuts in the capital grants that the Minister announced not long ago, with special reference to the cut in the lowland drainage grant. There is a case for substantial aid to the pig and poultry sectors—for example, a pig processing aid scheme. It makes more sense for the British people to pay direct aid to our industry than to pay taxes into the European budget through higher food prices. That is the basis of the Opposition's attitude to the positive MCAs.
I am not suggesting that all the problems in the industry have been caused directly by the Minister—far from it—but the high interest rates suffered during the past year and the increase in petrol and diesel tax will do real damage to its profitability. I listened carefully to the Minister. He said that he wanted the 1980s to be a decade in which British agriculture increased its production and its share of the world markets. I do not wish to be disparaging about the marketing experts and committees that the right hon. Gentleman has appointed. I do not think that they were appointed as a smoke-screen to deflect attention from some of the actions that many of us believe the Government should be taking to help British agriculture. One can appoint as many marketing experts as one likes. When investment in the industry is falling as sharply as it is now, and when, last year, more than 30,000 workers in food processing lost their jobs, it is almost peripheral to make a major issue of appointing marketing experts.
There are real problems facing British agriculture. They have to be tackled. They will not be solved in the price negotiations that are to start in earnest next week. They will be solved by taking hard decisions in the Cabinet Room in Downing Street. That is why our amendment, which I am glad the Government have indicated is acceptable to them, reaffirms our opposition to the CAP as presently constructed. There has to be reform of the policy. It is against the interests of the British people. That is why we hope that the right hon. Gentleman will succeed in holding down increases in prices and that he will succeed in avoiding a further escalation in the production of those commodities already in surplus.
There is no point in the Prime Minister achieving a net reduction in the British contribution to the Community budget if it is more than offset by enhanced contributions from the British in the form of positive MCAs and an increase in our share of the cost of escalating surpluses.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith): We have had an interesting debate, not least in trying to seek clarification of precisely what is the policy of the Opposition towards agriculture and food. Although there may have been a considerable degree of equivocation in the speeches from the Opposition Front Bench—I shall return to them—the British food industry, in its widest sense, can have no confidence in the line put forward by the Opposition to the effect that their interests will be represented by the Labour Party in negotiations in Europe.
As I am afraid is sometimes the case, we have had the usual run of headline-seeking speeches. The right hon. Member for Barnsley (Mr. Mason) and my hon. Friend the Member for Southend, East (Mr. Taylor) referred to the


easy, headline-catching issue of sales of butter to Russia. I share their concern. I hope, equally, that they realise the part that the United Kingdom has played in endeavouring to restrict those sales. They might acknowledge the fact that at the present time there are no refunds on butter sales to Russia.
The right hon. Member for Barnsley also raised the question of ales of butter to schools such as Eton. Before doing so, he should have reflected on the fact that Eton first qualified for the purchase of butter at a subsidised rate in 1974. He might reflect upon which party was in power at the time and his position in that Government and every year thereafter. Before the right hon. Gentleman again tries to seek headlines in the speeches he makes, he might find it rewarding to carry out some research into the schools attended by his right hon. Friend the Leader of the Opposition.

Mr. Jay: I understand that this debate does not have to end at 10 pm. As the hon. Gentleman has mentioned sales of butter to the Soviet Union, will he answer the simple question that I asked? Is it true that those subsidised exports increased 60 per cent. in 1980?

Mr. Buchanan-Smith: Subsidised exports did increase. I have not denied it, I deplored it, and I hope that the right hon. Gentleman heard that. I hope also that his old school benefited from the butter subsidies.
In a debate of this nature there is always accusation and counter-accusation, but it has to be recognised—and my hon. Friend the Member for Banff (Mr. Myles) did so—that in many ways the common agricultural policy has achieved a great deal. There are several positive achievements. Those who seek to criticise it, especially the Opposition Front Bench, must get their arguments into perspective.
It is significant, for example, that the hon. Member for Edinburgh, East (Mr. Strang) spoke of restraining the growth in expenditure on the CAP. In the last year for which the Labour Government were responsible the growth in expenditure on the CAP amounted to 26 per cent. I hope that he will give the Conservative Government credit for having reduced that rate of increase in expenditure to 10·7 per cent. last year. The Conservative Government have achieved a reduction in the rate of expenditure that the Labour Government dismally failed to achieve.
The right hon. Member for Battersea North (Mr. Jay) raised the question of stocks. It is easy, when looking at Europe as a whole, to talk of mountains, but beef stocks amount to 16 days' consumption. My hon. Friend the Member for Southend, East is always referring to butter, but the stock amounts to 17 days' supply. I share the view expressed by my hon. Friend the Member for Devon, North (Mr. Speller); I would rather have a reserve outside my door than an empty belly within, and I feel sure that that view is shared throughout the country. The Opposition must realise that we cannot support agriculture and food without being prepared to devote resources to that end.
Several references have been made to the Commission's paper "Reflections on the Common Agricultural Policy." It compares the proportion of GNP which various countries in the Western world devote to the support of agriculture. The EEC devotes about 1·5 per cent. of the GNP to the support of agriculture. In the United States of America that figure is 1·5 per cent. Japan

devotes 5 per cent. of its GNP to the support of agriculture. Therefore, although in absolute terms, because we are looking at Europe as a whole, the amount of money spent in support of agriculture may seem large, hon. Members, to be fair, should get their figures into perspective and realise that the amount that Europe is prepared to devote to agriculture is very much in line with, and in some cases less than, the amount devoted to it by other countries in the industrialised Western world. Hon. Members on both sides of the House should be prepared to acknowledge that.

Mr. Marlow: Will my hon. Friend give way?

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. It is obvious that the Minister is not giving way.

Mr. Buchanan-Smith: I turn now to the question of prices. The hon. Member for Bradford, South (Mr. Torney), who is no longer in his place, made a bitter speech about agriculture, about the Common Market and about the contribution made by prices. I remind the hon. Gentleman and the House of the contribution which agriculture has made not only to the economy of the United Kingdom over the past 12 months but to the economy of Europe. Farm gate prices rose last year by 6 per cent., food prices generally by 9 per cent., non-food prices by 14 per cent. and wages by 19 per cent. Those are the figures which face us and those figures are a measure of the contribution which agriculture has made to the economy of this country over the past 12 months—a contribution which we wish to see agriculture continuing to make.
It is in the face of that contribution—the contribution that we know that agriculture can make to the economy of this country—that, given the fall in real incomes, which we acknowledge and which my right hon. Friend acknowledged at the beginning of the debate, we have to view the review of agriculture prices in the Common Market in the weeks ahead.
Here we want to know the position of right hon. and hon. Gentlemen opposite, because they go on talking in terms of price restraint in the face of those figures, when agricultural incomes in real terms have been falling so much, and all they seem to want to do is make sure that agricultural incomes fall further still.
Turning to the question of the co-responsibility levy, the hon. Member for Edinburgh, East, who wound up for the Opposition, said that he was totally opposed to the co-responsibility levy, that that was the one thing that must be opposed at all stages. I would remind him that it was his Government——

Mr. Marlow: rose——

Mr. Deputy Speaker: Order. The hon. Gentleman is not giving way.

Mr. Marlow: On a point of order, Mr. Deputy Speaker. At what time is this debate scheduled to finish?

Mr. Deputy Speaker: Eleven-thirty.

Mr. Strang: It is not my contention that the Minister is likely to eliminate the existing co-responsibility levy, but I welcome his opposition to the increased levy for intensive producers, and I still believe in principle that we who were in the Labour Government should be opposed to these levies.

Mr. Buchanan-Smith: I am interested to hear that. The hon. Gentleman has confirmed that he is in principle


opposed to these levies. I remind him that it was his Government—and he was a Minister in the Ministry of Agriculture at the time, attending the Council of Ministers—who agreed to the introduction of the co-responsibility levy in September 1977 at a rate of 1½ per cent. There we have the kind of hypocrisy that we have had to face throughout the whole of this debate tonight.
I turn finally to the one issue on which I believe we have had the most hypocritical attitude from the Front Bench opposite and in the speeches of so many hon. Gentlemen. I refer to the question of the revaluation of the green pound. The hon. Member for Edinburgh, East said that it was the first introduction of a tax on food since the corn laws. I remind him that it was his Government who first introduced minimum import prices for cereals. Therefore, they, again in principle, say one thing and do something quite different. That shows the hypocrisy of the position which they are taking tonight.
I believe that those who are clamouring for this revaluation of the green pound are simply flying in the face of what is in the best interests of British agriculture and of the British economy. The right hon. Member for Barnsley said that we should test what effect revaluation would have on prices. We do not need to test it. We know what happened when the Labour Government had negative MCAs as high as 45 per cent. That was a 122 per cent. increase in prices. It has been tested already, and we know that it does not have the effect on prices which the hon. Gentleman might claim for it.
It is significant that those who are clamouring for a revaluation of the green pound are precisely those who want to get into the British market and take away

opportunities from British farmers and the British food-processing industry. I think that it is significant that the Labour Party is seeking to align itself with them. It also comes strange from a party that constantly criticises the strength of sterling and the effect it has on our manufacturing industry to seek to remove the one device which helps to protect a major section of the British economy from the effects of a strong currency.
That demonstrates the hypocrisy of the position of the Opposition tonight. If they had their wish about revaluing the green pound, the only effect would be to lower farmers' incomes, to strangle the opportunity for our processors and to put at risk the security of supplies to our consumers. That is why farmers, processors and consumers look to this Government to look after their interests and those of the country.

Question, That the amendment be made, put and agreed to.

Main Question, as amended, agreed to.

Resolved,
That this House takes note of European Community Documents Nos. 5091/81 and 5091/81 Addendum Ion Common Agricultural Policy prices 1981–82; 5191/81 on the agricultural markets situation 1980; 12271/80 on Reflections on the Common Agricultural Policy: and the Ministry of Agriculture, Fisheries and Food's unnumbered explanatory memorandum of 17th March on the development of livestock production in Ireland; recognises the contribution United Kingdom agriculture makes to the national economy and the need to obtain adequate returns for United Kingdom producers; and supports the Government's intention to seek an agreement designed to reduce production of structural surpluses where these exist, and stresses the need to hold down prices on those products in structural surplus and to submit proposals on common agricultural policy reform which will be designed to reduce the costs of the common agricultural policy which will take account of the interests of food processors and consumers.

Northern Ireland (Enterprise Zones)

The Under-Secretary of State for Northern Ireland (Mr. David Mitchell): I beg to move,
That the draft Enterprise Zones (Northern Ireland) Order 1981, which was laid before this House on 3 March, be approved.
The order provides the framework for the introduction of enterprise zones to Northern Ireland and shadows similar provisions enacted in schedule 32 to the Local Government, Planning and Land (No. 2) Act 1980 which apply to the remainder of the United Kingdom. The proposed order covers the non-fiscal aspects of the enterprise zone experiment and more generally deals with the designation procedure for making modifications, the new planning powers which will be available in enterprise zones, and exemption from rates on industrial and commercial properties within designated areas. The fiscal provisions applying to enterprise zones have already been enacted in the Finance (No. 2) Act 1980 and will apply to Northern Ireland. The provisions in this order therefore tie up the loose ends.
It may be helpful if I go through some of the provisions in more detail. The order follows closely the provisions already in operation in the rest of the United Kingdom. There are inevitably some differences arising through the different structures of central and local government in Northern Ireland. The main difference, as hon. Members will know, is that the Department of the Environment for Northern Ireland as planning authority for the Province is designated the enterprise zone authority, unlike in Great Britain, where district authorities, among others, can be invited to prepare schemes. To ensure that a district council has some statutory say in any enterprise zone which might be proposed for its area, the Department is required to consult that council before preparing a scheme. I am glad to say that Belfast City council, within whose area Northern Ireland's first zone is located, fully supports the enterprise zone proposals for Belfast and has been closely involved from the outset. In addition, I intend to invite the city council to nominate two representatives to serve on the advisory committee which I am setting up shortly.
I shall deal now with some of the more detailed provisions of the order. Part II provides for the preparation of an enterprise zone scheme and for the subsequent designation of the zone. It also provides powers for an enterprise zone scheme to be modified. An opportunity is given to the public to object to any developments which would be permitted by the scheme if it were brought into effect. Objections must be given full consideration, and the Department may modify the scheme to take account of representations made. Opportunity is provided to challenge in the High Court the validity of an adopted scheme. Provided that no challenge has been sustained, the Department may designate the area as an enterprise zone by order subject to the negative resolution procedure.
Following designation, the fiscal and rating concessions will take effect and the proposals set out in the enterprise zone scheme will take on the force of a planning permission. These measures will last for a specified period—usually 10 years—as the intention is to give an effective boost to the redevelopment and improvement prospects of rundown areas rather than a permanently favourable tax regime. So that investors can be assured of

the continuance of an enterprise zone for the full 10-year period, it will not be possible to revoke the designation order.
Part III of the proposed order provides for the effect of the scheme in granting planning permission. Permission may be subject to any conditions or limitations specified in the scheme and the approval of the Department where this is specifically required by the scheme. In practice, conditions or limitation will be used to enforce the necessary controls over polluting or hazardous developments. These provisions pave the way for private initiative to carry out development with the minimum of control and interference in the form of planning restriction but without encroaching on any existing rights under general planning legislation.
Part IV of the proposed order provides for industrial and commercial premises in an enterprise zone to be exempt from rates. The Department of the Environment is required to compensate fully district councils for lost revenue.
The draft order seeks generally to bring Northern Ireland into line with Great Britain. Much of it, particularly what lies behind it, has already been fully discussed at two meetings of the Northern Ireland Committee. Accordingly, I commend the order to the House.

Mr. Tom Pendry: The order and the proposals before the House are the product of almost a year's discussion and, I might add, dispute. As the Minister said, two meetings of the Northern Ireland Committee were devoted to the proposals. The Under-Secretary and, in particular, his predecessor have been most amenable to the suggestions that were put forward at those meetings. Indeed, the policies have been adapted accordingly, particularly in relation to the size of the enterprise zone. It should be placed on record that many of the views that were expressed at those meetings were accepted.
The Opposition have always expressed reservations about the way in which this idea might work in practice. We have had almost 12 months in which to consider this laissez-faire experiment, and I am bound to say that I find little to convince me that the Northern Ireland enterprise zone will make a noticeable impact on the state of the economy either in the Province or in Belfast, where the zone is to be designated.
While the Opposition welcome any Government interest or help for the Northern Ireland economy, we do not regard this measure as anything like adequate, given the serious economic problems that are facing the Province. Last week I was in Belfast and Coleraine, and I met trade unionists and representatives of the CBI. I was moved by the general mood of gloom and despondency that was felt about the state of industry throughout the Province. Factories are closing, jobs are going for good and the level of unemployment is now the highest in living memory. The figures published last week reveal that the output of all Northern Ireland industry slumped by a massive 16· 3 per cent. in the year to January 1981.
These arguments have been heard many times before, but they must be repeated. The unemployment rate in Northern Ireland is about 120,000, if one takes the unregistered work force, and 6,149 of last year's school leavers still do not have a job. In view of the grave


problems, the Government's proposals to establish the enterprise zone in Belfast is no more than window dressing.
Of course, the Opposition do not oppose the Government's help for industry and small businesses. We welcome any initiative on that score. Nor do we object to the tax and rating concessions to promote jobs and encourage industrial regeneration. We do not oppose the order on those grounds.
We wish to make it clear that an enterprise zone in Belfast is no answer to the problems of urban decay and unemployment. The scheme is no substitute for comprehensive public sector investment in housing and improved infrastructure. The scheme in relation to Northern Ireland and the rest of the United Kingdom is a distraction from the real job of tackling deep-seated causes of inner city and urban decay. It is a diversion from the task of reducing the intolerable levels of unemployment. I am glad to see that the hon. Member for Liverpool, Wavertree (Mr. Steen) agrees.
It is important to put the enterprise zone in perspective. The Government have, predictably, built up the advantages which, they say, stem from the scheme so that they are seen to be active in the industrial sphere. We are not impressed by the whitewash. The Opposition have stressed on a number of occasions that Northern Ireland is a special case which deserves special treatment. Nothing less than a co-ordinated regional policy is sufficient to tackle the dire problems faced by workers, non-workers and industry in Northern Ireland.
We have fundamental objections to the manner in which the Government are treating the Northern Ireland economy. We question the relevance of an enterprise zone in a small area of a single city to the real task of combating the problems.

Mr. Anthony Steen: I hope that the House does not think it inappropriate for a Liverpool Member to take part in such a debate. I was interested in what the hon. Gentleman said. Does he agree that the test of the success of the enterprise zone is whether it generates private investment and whether the banks, insurance companies and small firms go back into the area? Public money must be used as leverage for private money. Without that, it is unlikely that the zone will succeed.

Mr. Pendry: I agree. I shall come to that, and I am sure that the hon. Gentleman will continue to agree with me.
We question the relevance of the scheme to a small area within an area with large-scale problems on the industrial front. We do not oppose the order, because we believe that help, however minuscule, is not to be spurned. We do not oppose it, but we do not believe that it is the answer.
I wish to raise several matters in connection with the working of the zone which require an answer from the Minister tonight. He gave a brief introduction. I am sure that he will be more forthcoming later. He should answer certain questions if the scheme is not to be a white elephant.
In the past, the economic and physical fabric of the zonal area in Belfast has not proved attractive to investors. For sound and perhaps strategic reasons, industry has not gone in to such areas in any force. Will it go there now?
I have doubts about whether planning restrictions and taxations are the main operative factors in deterring investors from this area of Belfast. I argue instead that the economic infrastructure has not been amenable to manufacturing industries.
I raised the matter at the last meeting of the Northern Ireland Committee, and the Under-Secretary of State replied to my comments on 12 March. He said that he considered that the present infrastructure was under-untilised rather than poor. That is a matter of opinion. I am still not convinced that the medium-to-large job-creating ventures will be attracted to the zone, because the services required will not be available in the quantity demanded.

Mr. David Mitchell: Can the hon. Gentleman clarify what he means when he speaks of the services that are not available?

Mr. Pendry: I take up the intervention of the hon. Member for Wavertree, who asked about back-up services such as banking and other facilities that go with an industrial scheme of this nature.
The Minister said that a monitoring team would be set up to oversee the progress of the enterprise zone experiment in Belfast and that the team would address itself to the problems that might arise from the weakness of the economic infrastructure. This debate provides a good opportunity for the hon. Gentleman to tell the House exactly how the team will be composed. Will it, for example, prepare annual reports? What powers will it have to ensure that any suggested improvements are undertaken?
When we have discussed Northern Ireland affairs in Committee, I have asked about the type of company that is likely to take up the enterprise zone package and locate new firms and buildings within the designated area. I understand that up to 12 March there were 50 inquiries about the zone. That information came to me in the Minister's letter. Apparently, the inquiries were made by a cross-section of retailing, warehousing and industrial undertakings. I shall be grateful if the Minister will detail the exact proportions of the inquiries that have been received under those broad headings. Have there been more inquiries from storage companies and warehouses than from manufacturing firms? It is only when we know of the type of firm that is expressing interest that we shall be able to know how many new jobs are likely to accrue from the introduction of the experiment.
Secondly, the House will be interested to know whether there have been any firm decisions on the part of companies to take up sites in the enterprise zone. From my own experience, I know that there is a world of difference between an inquiry by letter or telephone and a positive decision to site a building or factory. Considerable elucidation is essential.
A criticism frequently levelled at enterprise zones is that they are likely to distort economic patterns in surrounding areas and endanger the future of existing industries or firms in those areas. What representations has the Minister had from the firms that are sited in the area adjacent to the zone? I know from my talks with industrialists in Belfast that they are worried about competitive firms moving into the area of the zone.
The main reason why the Opposition have been and will remain sceptical about the experiment is that the proposals


accompanying the enterprise zone emphasise property development and will appeal to large office and warehousing activity. If that is so, the proposals will not be enticing to additional economic activity. They will merely encourage the relocation of businesses already sited in Belfast. Will the Minister tell the House exactly how many of the inquiries have come from groups wishing to relocate to take advantage of tax and rating concessions and how many have come from potential new investors intending to start new enterprises?
It is primarily because we consider that the zone will become a haven of relocated office blocks and warehouses that we withhold our full support for this measure. The emphasis should have been on job creation and not on the easing of planning arrangements, which will appeal to those who wish to make quick profits. If the enterprise zone succeeds in attracting new investment, it will make little impact on urban dereliction and unemployment. When referring to the enterprise zone in its area, the Scottish TUC was of the opinion that the Government were attempting to paint a silver lining on a black cloud. That is pertinent to the Northern Ireland enterprise zone as well. The people of Northern Ireland deserve better treatment than that.
Unemployment in the Province is reaching unmanageable proportions. There may be serious social consequences if it stays at its present level or rises even further. The Government have a duty to tackle these problems and to face the consequences of their own economic failure.
The scheme before the House is experimental. The Northern Ireland economy needs much more than untried and unproved theories if the current rate of economic decline is to be arrested. I repeat that the scheme is a window-dressing exercise which, even if it proves successful, will bring few jobs and little comfort to the people of Northern Ireland.

Mr. Robert J. Bradford: As the hon. Member for Stalybridge and Hyde (Mr. Pendry), the spokesman for the official Opposition, said, we have had two goes at the enterprise zone debate in Committee. Almost every point which it is possible to make has been made. In the two introductory speeches, many of the old fears and the old recipes in response to those fears have been ventilated. I do not wish to detain the House unduly, except to return to one or two points which have been made previously which have not been answered as fully as some of the others which the Minister has dealt with on previous occasions.
Unfair competition is one of the great worries which we entertain about enterprise zones. It is difficult to be convinced that the companies which reside on the border of the newly created zone will not be unfairly hindered by the special treatment afforded to companies inside the zone. There has been no satisfactory reply to that fairly fundamental point in the debate.
How can the Minister safeguard the companies that are not inside the zone from being affected by the advantageous conditions which will be enjoyed by the companies inside the zone? There has been reference to tax relief. At the moment, with taxes going up, it is clear that that will be not an inconsequential part of any company's cash flow problem.
I should like to take up the point which was stressed by the spokesman for the official Opposition. He referred to the need for greater assistance. In a previous debate, my right hon. Friend the Member for Down, South (Mr. Powell) said that Northern Ireland was in need of a general application of Government assistance, not just for Belfast but for the whole Province. Why should we single out a small segment of Belfast and say that that is the area in which we shall concentrate and ignore many other areas of the Province which are equally in need?
We should consider what sort of more general assistance should be afforded. I have said—I know that the Minister does not accept it—that at the end of the day, apart from a small amount of tax relief afforded to companies in the enterprise zone, the Government are doing little more than providing a line on a map. It does not cost them a penny to put a line on a map. Apart from the tax relief and that line on the map, what other assistance are the Government giving?
If the Government are interested in rejuvenating industry in the Province, they must seriously consider energy charges. Some steps have been taken in that direction since we last discussed the enterprise zones. We must also consider transportation costs and ways of equalising them. We must consider making the more generous grants which are reserved for small segments of Northern Ireland applicable to the whole Province. If we tackle the problem more generally and not by isolating a small segment of the Province for special treatment, we shall create more jobs.
If a part of Belfast offers advantages to a company, why should it not choose to go there in the first place? The Minister may say that the rate relief is attractive, but rates are not a major item of expenditure.
We must consider security in Belfast. The area outlined on the map is singularly unattractive because it is prone to terrorism. After what happened in Dublin this week, we must be careful about the incentives that we offer to businesses. North or West Belfast would be the last place that I would choose to locate a business, although I am not consigning the area to the dustbin. The space could be used, for instance, for community projects, which would be far more beneficial than warehouses. The enterprise zone will not attract labour-intensive manufacturing industries, because there is no easy access to roads. One road leads to the north of the lough, but all the facilities, including the docks, are to the south. Heavy manufacturing needs to be more judiciously located. The area would attract only warehouses and service industries, which are not labour-intensive and will not help us.
If the Government wish to help the 99,828 unemployed in Northern Ireland, they will pay attention to fuel and transportation costs and to the need to give the Province a larger slice of the economic cake. I do not blame the present or the previous Administration, but Northern Ireland has bean allowed to put too many eggs in one basket. The enterprise zone is only a good-sized thimble and not a basket. W e need a sufficiently large basket to hold all our economic programmes. We must consider locating some of Great Britain's economic programmes, particularly in high technology, in the Province. A line on the map and a little rate relief are not what we need. Ulster needs a fair slice of the economic cake of heavy and high technological industry.

Mr. James Kilfedder: I hope not to repeat what I said in the Northern Ireland Committee, although I may touch on some matters. I intend to be brief.
The Minister recommended the order on the basis of equality for Northern Ireland as enterprise zones had already been created in Great Britain. But the enterprise zones in Great Britain have not been greeted with great joy by the people there. They provide no dramatic solution to the problems of areas of industrial and social decay. They may somewhat reduce the hardships in those areas, but they will not resolve the problems or provide a long-term solution.
I am not one of those who believe that because we are in the midst of a depression one must therefore take a sad, dismal and defeatist attitude. I believe that this is the time for an imaginative and radical measures. But this is not a radical measure. As I said in the Northern Ireland Committee, it is a petty measure which will do little to stem the tide of unemployment or the rate of industrial decay in the Province.
Sadly, the Government have nothing to offer the people of Northern Ireland but measures such as this, creating an experimental zone in Belfast. They have nothing to offer but the old remedies of credit restriction and retrenchment. There is a new name for it now: it is called money control. In place of the exciting release of the enterprising entrepreneurial skills of a captive nation of aspiring, go-getting business men, the Government offer a few hundred acres in a dozen enterprise zones throughout the United Kingdom.
The so-called enterprise zones would be better called by a more realistic name. They are in fact twilight zones which the enterprising have largely abandoned for good, sound, significant commercial and social reasons. I do not believe that the Government seriously believe that they can revive the social and commercial life of the area of Belfast covered by the order through the methods proposed in it. It is certainly not the kind of thrusting, challenging measure that we were led to expect from a Conservative Government.
Whatever the order does for the 500-acre area in Belfast, it will do nothing for the rest of Northern Ireland, which is itself a depressed region within the United Kingdom. By introducing the order, the Minister is really saying that Government regulations and bureaucratic controls of every kind have created planning blight and that lack of investment has brought about the downfall of this part of Belfast and ruined the natural enterprise of the people in it. In the small area of the enterprise zone, the Government will ensure that the dead and palsied hands of the bureaucrats, planners and civil servants who have controlled, dominated and interfered in business life will for a short time be removed.
In my view, the order will not hasten the end of the economic blight, social deprivation and urban industrial decay in Northern Ireland. There is no grand design here, for which I have called so often in the past, no challenge and no imaginative assault on the problems of the hordes of unemployed, the industrial stagnation, and the poor housing which are a denial of the standards that British people are entitled to expect.
The order limits the enterprise zone to one small area of Belfast. The Government have described it as an experiment, but the Ulster people have had enough of experiments.
I again repeat my demand for action. I demand it for the whole of Ulster, not just for one small area of Belfast. Such action should stop the steady erosion of Ulster's industrial base and reduce the vast army of unemployed. If the Minister goes round the Province, he will see that factories are closing in North Down and other areas which never expected closure. Firms are closing because of Government policy.
Therefore, strong, radical and imaginative Government action is required. This is a puny measure which I hope will not mislead the Ulster people into believing that it will solve their problems. Northern Ireland's plight should demand all the Government's energies as well as more Government finance. Indeed, with 100,000 unemployed, the Ulster people, both Protestant and Roman Catholic, should be united in fighting that sort of blight. They should unite in fighting the Government and force them to take steps to remove the scourge of bad housing and unemployment from a Province which is deserving of more help.
This order is like sewing a patch on a worn-out coat and saying that the renovation will transform the coat. Northern Ireland urgently needs a regional plan covering the whole of the Province. The Government have turned their back on the pleas that I have made in the past for such a regional policy. As a result of the implementation of their national plan in Northern Ireland, Ulster has suffered more heavily than other parts of the United Kingdom.
I fear that the Government still do not realise that their measures will fail to effect any dramatic change. I believe that the number of unemployed in Northern Ireland will continue to rise, as will the number of sub-standard houses. It is extraordinary that included among the unemployed are builders who could build new homes, yet they remain on the dole at a time when people need houses in which to live and bring up their families.
Even at this late hour, the Government should offer some real hope to the people of Northern Ireland. They should say that the Belfast enterprise zone is only the first step in transforming Northern Ireland into a Province-wide experimental zone. They should mobilise all their efforts into transforming the Province into a fit place in which the people may live.

Rev. Ian Paisley: Great regret has been expressed on both sides of the House about the order. It is only right that we should look at the background to it.
Before I proceed, I should like to apoligise for the absence of my hon. Friend the Member for Belfast, North (Mr. McQuade), whose area is affected by the order. As hon. Members may know, my hon. Friend had a stroke while attending the House and has been ill. However, after Easter he hopes to take his place again in the Chamber.
The other hon. Member who is strangely absent, and who is good at pointing out—especially in the media—when Northern Ireland Members are absent from such debates, is the hon. Member for Belfast, West (Mr. Fitt). He seems to think that when he is in the House every other Northern Ireland Member should be here. Although


the order affects his area, he is strangely absent. I put that on the record as he is very good at putting other hon. Members' absences on the record.
I want to look at the background of the Government's approach to this subject. The Government announced that they would set up these enterprise zones. I am not opposed to the setting up of the zones, but I feel that it is infinitesimal in terms of what is needed to deal with the problem. I assume that no Northern Ireland hon. Member will vote against the order, but that does not mean that we think that it will do anything to grapple with the serious problems of the Province. To me, however, the Government's attitude is static. They have said that these zones could be areas of 500 acres, but their first proposal is for 208 acres. If the Government had grasped the magnitude of the terrible unemployment scourge that we have, they would not have been tinkering with 208 acres but their first proposal would have been for the entire acreage.
After strong opposition emerged from both sides of the Northern Ireland Committee, the Government announced that they would take 500 acres. What confidence can hon. Members and the people of Northern Ireland have in the Government, who were prepared to give a draft outline of a plan to take in 208 acres?
How was that first acreage planned? If ever there was magnificent gerrymandering, that was the most magnificent of all, leaving aside Mackies' factory and other potential places that would help the unemployed. I am glad that that has been rectified and that the Government have seen sense and heeded the representations made to them.
However, there is one matter to which I draw the attention of the House—that is, the inclusion of 100 acres on the north foreshore of Belfast lough. I take issue with the hon. Member for Antrim, South (Mr. Molyneaux)—who is not with us tonight—when he said that that was very good news for the Carrickfergus area. As the hon. Member for Carrickfergus, I tell him that it is not good news because Carrickfergus does not need new factory buildings. We have a whole complex of factories sitting idle. There is the most complex of Courtaulds, miles of it, but it is now all empty. When I came to the House in 1970,3,000 people were employed. Now, 300 are employed and they are on notice. There is another vast complex at ICI, where at the end of the month 1,800 will be wiped off, unemployed.
How much better it would have been if the Minister had said that the Government would take 100 acres in Carrickfergus so that those coming into the area would have some advantage as regards dealing with unemployment problems.
In recent years, nowhere has felt the scourge of unemployment more than Carrickfergus. As the Minister knows, there has been a terrible recession in the textile industry. Courtaulds and ICI specialise in textiles. Instead of my suggestion being adopted, there has been a decision to take in reclaimed land. Has the Minister had any inquiries about the 30 acres that are available? The rest of the area is not available. There may be 100 acres, but only 30 acres is available and has access roads.

Mr. David Mitchell: Is the hon. Gentleman referring specifically to the North foreshore?

Rev. Ian Paisley: I refer to that area. Only 30 of the 100 acres are available. Only 30 acres provide means of

access and would be able to supply services. According to the hon. Member for Stalybridge and Hyde (Mr. Pendry), 50 firms have made inquiries. How many have specifically applied for that area? I should welcome any business that came to Northern Ireland. I should welcome any alleviation of the scourge of unemployment.
I agreed with the hon. Member for Down, North (Mr. Kilfedder) when he said in Committee that the Government should have declared the whole Province an enterprise zone. We have gone so far down the road of unemployment that it can be arrested only by taking in the whole of the Province. An inquiry was set up to consider our difficuties. The Quigley report was a diagnosis of our ills. The Government have not brought forward a remedy for the ills diagnosed. What we need is not tampering here and there but an overall plan. We do not want petty or puny tampering. This puny little enterprise zone is almost insulting to the unemployed in that agonised Province.
As I said in debate last week, we are prepared to carry the cross with the rest of the United Kingdom. We are not saying that Northern Ireland should not also bear the cross, but we have already carried more than our share of the load. In Northern Ireland the average wage is lower than that found in the rest of the United Kingdom. The cost of living is higher. The cost of energy is higher. Gas is three times more expensive and electricity is one-third more expensive. Transport costs are heavier. Our unemployment queues have always been longer. Why cannot the Government set their sights on an overall enterprise zone for Northern Ireland? Northern Ireland could then have a plan and a goal that could be achieved with Government help. What will this enterprise zone achieve?
I am worried about several issues, one of which has been touched on by the hon. Member for Belfast. South (Mr. Bradford). What will happen to businesses on the fringe of the zone? Will they suffer so much that they will be forced into bankruptcies? Those inside the zone will be able to compete more easily while small businesses go to the wall. The zone might affect not only businesses on the fringe but businesses in our constituencies. They will not have the advantages of the businesses in the zone. Has the Minister considered that?
I am not too happy about the planning considerations. Too much power already resides in the Department of the Environment. This would have been a good opportunity to give the district councils a power in planning. The councils could have used the power to bring business to a particular area. I am sure that the councils would have accepted the responsibility and seized the incentive to attract jobs to their areas. Instead, the little power that they possess is undermined by the Department of the Environment.
The tragedy of Northern Ireland's unemployed is the knowledge that every month the situation will be more appalling. When the ICI figures and the rest of the Courtaulds figures are added and when account is also taken of the companies—I shall not name them—that are tottering on the brink of closing down, it is clear that unemployment will have risen to 125,000 in a few months' time. The real unemployment figure is even greater. One can add a further 10,000 or 15,000.
Northern Ireland finds itself in a state of great difficulty. To the Minister with his little enterprise zone, I would say that the whole Province should be turned into an enterprise zone. I trust that the Government will put all they have got into the proposed enterprise zone in order


to produce some small alleviation of the dilapidation and blight described by the hon. Member for Belfast, South in the districts at the lower end of the economy of Northern Ireland. I trust that some hope will be given to those districts.
The Government, however, have pursued a policy that is not helpful to the economy of Northern Ireland. Their policy is inflexible. If the Government pursue that approach, I can see only a state of abject hopelessness for the people of Northern Ireland. I make a plea to the Minister, who, I believe, wants to help, to look at the whole Province and not to be content with the proposal before the House.

Mr. J. Enoch Powell: By a peculiarity of procedure, the matter of the Belfast free enterprise zone has twice been before the Northern Ireland Committee. What hon. Members have before them tonight is not specifically concerned with the Belfast zone, still less with its details or delineation. What we have tonight is simply the framework which we would not need to be enacting at all by order if provision for it had been included in the legislation for Great Britain.
The opportunity to consider the matter more widely before the order was published in the form of a proposal did at any rate result in the extension of the proposed zone from 200 to 500 acres approximately and in the inclusion of a very different type of area from that originally envisaged.
The Minister, referring to the procedure that has still to be followed, indicated that when the order under this order was eventually made—the order that will designate the 500 acres or whatever it is to be—it would be subject to the negative procedure. He will not mind my reminding him that that is incorrect—at any rate unless it is immediately qualified. That order will be subject to no procedure.
If hon. Members representing areas in Great Britain which are affected wish to do so, they will have the opportunity to debate the proposed orders. They will have the opportunity to pray against the orders and, if arrangements can be made, debate specific proposals which have gone through all the other procedures and are about to be finalised and become law.
That is not to be the case for Northern Ireland, despite the request which my hon. Friends and I made, that as this is a United Kingdom experiment, we should be treated in exactly the same way and have the same opportunities as are given to any other part of the United Kingdom.
Following the first of the two debates in the Northern Ireland Committee, the Under-Secretary of State's predecessor was good enough to write to me and other hon. Members on 19 September last. In that letter he said:
Northern Ireland's enterprise zone is not being put forward as a major new extension of regional policy".
In the popular phrase, "You can say that again".
We in Northern Ireland do not know, except by occasional rumour, what view is taken in other parts of the United Kingdom of the utility of the schemes for free enterprise zones which are under consideration in the mainland. The rumours that reach us do not indicate any great degree of exhilaration or popularity, but I do not think any hon. Member representing Northern Ireland,

whatever be his background, when considering the proposition of a 500-acre zone under this scheme in Belfast, can seriously believe, to repeat the words used by the Minister this evening, that it can "provide an effective boost to redevelopment prospects in a rundown area". However glad we are that Northern Ireland has not been ignored in this experiment, we would not be doing our duty if we were to pretend for a moment either to the House or to the people of the Province that we imagined that that can be the outcome of the application of this measure to that 500 acres.
The hon. Member for Stalybridge and Hyde (Mr. Pendry) was right when he said that if we want Government action, either by remission or injection, to assist the Province as a whole and at least bring it nearer to the experience of the rest of the United Kingdom, it is to the infrastructure we must look, that which affects all enterprise, all industry in Northern Ireland alike, and which provides a fair means of comparison between one site and other, one place and another, in establishing an enterprise.
Since we last debated this subject in the Northern Ireland Committee, a statement has come from the most important source possible. The Prime Minister declared the Government's intention to bring the cost of electricity in Northern Ireland more closely into line with that in the rest of the kingdom. In a subsequent debate we learnt that the thinking was that that might be produced by "financial integration", if not physical integration, between that branch of the energy industry in the Province and the rest of the United Kingdom. But time goes by. It is four weeks since the Prime Minister paid us her visit and made that statement, and it becomes a matter of increasing urgency.
It is not on the basis of how many acres and which streets they will cover that people contemplate the industrial future of Northern Ireland. What they want to know is what will be the energy costs and how they will be brought into line with the rest of the Kingdom, and kept in line, which was perhaps the more important part of the phrase used by the right hon. Lady.
My hon. Friend the Member for Belfast, South (Mr. Bradford) mentioned transportation. I suppose that energy and transportation are the two legs of the infrastructure. So we join the hon. Member for Stalybridge and Hyde (Mr. Pendry) in saying to the Government "Do not imagine that you can give an effective boost to the economy of Northern Ireland unless you are prepared to say precisely what you intend to do—not to equalise, but at any rate to bring closer together, the basic conditions and the basic costs in Northern Ireland and those on the mainland."
It is even possible, though one wishes not to crab even something as small as this, that to some extent the establishment of a zone may be counter-productive, in that the unfavourable comparisons thus established between sites in the zone and other sites where marginal enterprises are perhaps being conducted will produce no net result. As for sites outside Belfast, they will look from a distance, if they look at all, at the opportunities, if they are opportunities, which are being created in Belfast.
Perhaps the most substantial financial element which is represented is the remission of rates—the fact that the equivalent of the rates which would be paid on the property in the enterprise zone will be carried by the Treasury, will be transferred to the United Kingdom. The Minister, in the last debate in Committee, indicated that on the existing


properties at the, I presume, then existing poundages, that would represent a cost of £¾ million, and that would increase if additional properties were occupied in the zone.
The Minister said that that represented an injection into the economy of Northern Ireland. It represents an injection into the economy of Northern Ireland only if we can be sure that that £¾ million, or however much more it is, is a net addition and is clearly seen to be a net addition on a separate account from all the rest. If all this means is that, whatever is to be the allocation this year, next year and the year after for Northern Ireland in the general Budget, £¾ million is to come out of that for the replacement of the rates which would have been paid on properties in that area, I am afraid the answer is nil.
The hon. Member for Stalybridge and Hyde applied a number of descriptions to the proposal of which the framework is before the House this evening. I do not think I got a complete list, but I noted "white elephant", "laissez-faire experiment", "minuscule", "window dressing"; and then there was a word which strikes a chord in all Northern Ireland hearts, "whitewash". It is an adjective for which we lack the accompanying noun nowadays, we do not regret that lack, but that is why the word "whitewash" is less frequently heard in Northern Ireland than it used to be.
I think the general opinion on both sides of the water on this notion in last year's Budget—how far away last year's Budget now seems—the general judgment which prevails on both sides of the water, is summed up in the simple word "gimmick". That just about describes it. It was a gimmick of the Chancellor of the Exchequer which he popped into last year's Budget, and so there has to be something in appearance done about it. But its relevance to the economy, its relevance to the problems of the United Kingdom as a whole and of Northern Ireland in particular, is, alas, remote.

Mr. Anthony Steen: I feel that the right hon. Member for Down, South (Mr. Powell) was perhaps unfair and unjust in thinking that the enterprise zone—although the order applies only to Northern Ireland the policy extends to the rest of the United Kingdom—will not have some effect. If it does something rather than nothing, it should be encouraged.
When I rise to speak, I do so always at the wrong time, just before the Minister wants to reply, so I shall make my remarks as short as I possibly can.
Enterprise zones apply to the whole of the United Kingdom. As I represent an area that is to enjoy an enterprise zone, some comments might be of use. The hon. Member for Antrim, North (Rev. Ian Paisley) understandably took a total view of the Province and more or less dismissed the enterprise zones as of no consequence, as other hon. Members did. These enterprise zones are areas where competition, private enterprise and capital have failed. The private sector has moved out. On the whole, the Government are trying to find a device to bring private enterprise back. They are using public funds to encourage private firms to return to areas which they have abandoned.
The interesting part of this idea is the flip side of the coin, the urban development corporation. In Liverpool and London, the urban development corporation is giving public money for infrastructure which will, it is hoped, provide an incentive for private enterprise to return to

abandoned areas. The enterprise zone provides no infrastructure, so far as one can gather, but will encourage private enterprise to return to an area by lifting existing controls.

Rev. Ian Paisley: I do not know about the hon. Gentleman's area, but in regard to the area covered by the order I do not think that what he is saying is correct. There is one part about which it is not correct; the 100 acres never had anything on it. It has been reclaimed. II is actually the dumping ground of Belfast City council. The only enterprise that was ever on it was the dumping of refuse from the city. The hon. Gentleman may therefore have a different view of the area. The other part involves the Peter Pan bakery, but that was only included in the recent addition to the area.

Mr. Steen: Obviously, I am not as well informed as the hon. Gentleman about the area, but I understood that what he was referring to was only part of the area and that the other part had buildings and firms but that the firms have left. As I say, I am not in a position to go into the details. All I am talking about is the general pattern of enterprise zones. There will be differences in each area. The area in South Wales may well be similar to that in Belfast.
What I was trying to contemplate is the concept of what the enterprise zone is intended to do. In this case, it may be trying to bring private enterprise to an area which is not particularly attractive and which private enterprise would probably steer clear of. In other areas—the area in Liverpool is a good example—the businesses have actually left and there are empty buildings. The Leyland factory and the Dunlop factory are good examples of abandoned buildings which private enterpise has left.
The interesting thing is that private enterprise came in because the Government gave regional aid for large companies to come to an area to which they would not normally come. So the enterprise zone is another side of the same coin, because the Government gave regional aid to get businesses to an area to which they would not normally go, and they left. What one hopes will happen with the enterprise zones is that business will return, not because the Government are giving money but because they are lifting controls which they believe are preventing firms operating in the area. It is rather doubtful whether the incentives offered by the enterprise zone will be a sufficient inducement to bring business to an area which either it decided initially not to go to or which it abandoned. The concept may be a difficult one to grasp.

Mr. Bradford: I thank the hon. Gentleman for giving way. If the Government recognise that a diminution in bureaucracy will assist industries in a given area, surely it would be criminal not to diminish bureaucracy for the whole of industry. That is the logical extension of the hon. Member's argument. Therefore, a separate segment does not need to be created.

Mr. Steen: There is an argument which says that all controls should be lifted in a whole area to see whether the business enterprise will prosper. In fact, the argument could be extended to the lifting of controls throughout the country. However, I believe that the Government are right to select a number of areas. It is questionable whether they are the right areas, whether the areas are large enough and whether the lifting of controls is extensive enough. Similar


free ports and enterprise zones in the United States, some of which are flourishing, are in a particular place for a particular reason—not because private enterprise has abandoned the areas or because they are abandoned areas. They are the areas where prosperity is expected to grow faster than elsewhere.
So the argument may be based on a false premise when it is suggested that by lifting a limited amount of controls one can persuade a private business to go back to an area to which it would not otherwise go. Once firms go to areas for the wrong reasons, they leave for the wrong reasons. As soon as there is an economic downturn, they go back to the area which, but for Government intervention, they would originally have chosen. In many ways, therefore, the regional aid programmes—and possibly, enterprise zones—will distort the market forces and persuade firms to act in a way in which they would not normally act.
However, enterprise zones should be given a whirl. In the past, Governments have tackled urban deprivation by pumping small sums of money into social or community experiments. I shall not list the numerous experiments that there have been during the past 15 years, including urban aid programmes, partnerships, comprehensive community aid programmes and so on. The idea should be given a whirl, even though there may be dangers.
I conclude by saying what I think the snags may be. First, if the enterprise zones do not have infrastructure grants, how will the businesses that return be able to refurbish the buildings or the land which are derelict and abandoned? In Liverpool, how will the old buildings that are already there be refurbished?
Then there is the problem of warehousing. In most large cities—I am sure that it is true of Belfast—there is an endless amount of empty buildings or buildings for warehousing. If warehousing is offered in enterprise zones rate-free, there will be discrimination against other warehouses which are paying rates. I do not imagine that there are in Belfast—as there are in Liverpool—so many buildings and so much warehousing business that empty buildings both outside and inside the enterprise zones could be occupied. One will have to go.
There is the further problem of rents. If a business does not have to pay rates, the landlords will charge higher rents. That could make the enterprise zone less attractive.
There is also the matter of retailing. If the enterprise zone allows superstores and hypermarkets, there will be an adverse effect on the inner areas, where small retailers will have to pay rates as well as rents. So, if the enterprise zone is too close to the inner area, it will have a devastating effect on the small firms and retailers in the inner area.
I think that the concept is worth a whirl, but the Government should bring in certain restrictions to prevent private enterprise in the area from being destroyed.

Mr. Ivan Lawrence: Is my hon. Friend aware that he does less than justice to the disadvantages of the enterprise zone? Is he aware that there is a dynamic construction company in my constituency called St. Modwens Securities, which moved to a waste part of Manchester on the Trafford Park estate, set up a dynamic development of construction units, having invested a vast

amount in the infrastructure, and began selling these to advancing enterprises at quite a rate, when suddenly an enterprise zone was set up on the other side of the road?
Investment groups with massive advantages which were denied to the local company were attracted to the enterprise zone. As a result, a substantial disadvantage was caused to the company based in my constituency. It is having difficulty in selling the remainder of its units. A great deal of anger is felt. I hope that my hon. Friend the Minister will take the issue on board. It might do more harm than good to set up an enterprise zone in such circumstances.

Mr. Steen: I am grateful to my hon. and learned Friend for giving that example, because it widens the debate to enterprise zones in general.
Perhaps I have spoken for too long in a debate which is primarily about Northern Ireland. I hope that my hon. Friend the Minister will realise that although the House is with him and supports the idea that the Government should lift controls to encourage private enterprise to return, there are severe doubts about whether the scheme will have a real effect on urban deprivation. Because of the shortage of jobs and business opportunities, it might result in the transfer of a prosperous business to another area. The test is whether there is real growth rather than a switch from one part of Belfast to another.

Mr. David Mitchell: My hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) took part in the debate with justification because we are debating an important part of the United Kingdom—Belfast. As a United Kingdom Member he is entitled to make his opinions known. He claimed that private enterprise has withdrawn from some of the areas and that the enterprise zone is designed to bring private enterprise back. He is right. That is a good description.
I was interested when the hon. Member for Belfast, South (Mr. Bradford) intervened to ask why we did not make the whole of the United Kingdom into an area where controls were lifted if lifting controls helped. We are experimenting. We are conducting a major trial in different parts of the country to see whether enterprise zones produce the results for which we hope. The Government have already embarked on a substantial programme to try to ease the burdens which are placed by Government on industry and commerce throughout the economy outside enterprise zones. Regimentation in terms of planning is being eased for small businesses. Employment legislation and company law are being eased. The multiplicity of questionnaires which trouble business men so much has been swept away since the Government came to office.
I turn to the questions that I was asked about the Belfast enterprise zone. The hon. Member for Belfast, South said that companies inside an enterprise zone have advantages and create unfair competition for firms outside. That theme was taken up by other hon. Members.
I am sure that the hon. Member for Down, North (Mr. Kilfedder) and other hon. Members will recognise that it is difficult to reconcile the complaint that the zone will give special privilege and advantages to the firms inside the zone with the complaint that is made at the same time that the scheme is a load of whitewash, it is not worth the


paper on which it is written, it will have no consequence and that it is of no importance. At least we should have consistent arguments.

Mr. Kilfedder: What is consistent is the rising unemployment in Northern Ireland. Surely the Minister agrees that the zone will not resolve that problem. A few jobs may he created in the zone, but those who are employed immediately outside it or adjacent to it may lose their jobs. That is what we are complaining about.

Mr. Mitchell: I never sought to claim that the zone would resolve all the employment problems in the Province. That has not been claimed by other Ministers in respect of other enterprise zones in other parts of the United Kingdom.
I was asked why the Government selected the part of the city that will form the zone. As my hon. Friend the Member for Wavertree has said, it has been picked for the good reason that private enterprise has withdrawn. We have picked deliberately on two areas. I shall take up the remarks of the hon. Member for Antrim, North (Rev Ian Paisley) on this issue. It is an area of decay and it is rundown. It is in the heart of the city. If we can restore the economic life of the area, the restoration will extend in concentric circles in the same way as the decay that preceded it.

Mr. Bradford: Will the hon. Gentleman write to me listing the companies that have withdrawn from the 500 acres or more to which he refers? I understand that most of the acreage was covered by housing and not existing enterprises. To substantiate his argument, I ask him to list all the companies that have left the area.

Mr. Mitchell: The hon. Gentleman knows that we do not keep records of companies that are not in the area. As they are not there we cannot record their non-existence. There are company premises, mills and linen weaving sheds that are empty. Those premises are inside the zone. The hon. Gentleman is wrong to suggest that there are large chunks of housing within the zone. The zone has a somewhat curious wiggledy edge, because we have tried to keep housing out of the area and to include other areas that can genuinely benefit from the presence of commerce and industry.

Mr. Bradford: rose——

Mr. Mitchell: I do not want to give way again as there are other contributions to which I must respond.
The hon. Member for Belfast, South complained that service industry is likely to come into the zone. I beg him to recognise that the world has moved on from the day when jobs and prosperity were measured by the numbers of blue collar workers doing grimy jobs. Every major industrialised country is now seeing the largest area of job creation in the service industries. We should not turn our backs on the opportunities that they will provide.
The hon. Member for Down, North argued that the enterprise zone will not be a solution to the problems of the areas of decay. We do not claim that it is a total solution. It is an experiment that we believe will help considerably. The tenor of the attack that has been mounted on the zone, which is that it will help the wrong people and damage those who are outside it because those who are inside will have a special advantage, is an indicator that a significant economic impact is expected within the zone.
I give a practical example to meet the argument about artificial competition. Someone might say that he is in the car selling business and tht it is unfair that his business should be situated on the edge of an enterprise zone. He might suggest that the order should be so framed that his business is included in the zone. However, he will have on his doorstep a multitude of business opportunities for selling cars to business executives, which he would not have had if he had remained on the edge of a dying and decaying area.
The hon. Member for Antrim, North referred to one of his colleagues, the hon. Member for Belfast, North (Mr. McQuade), who is recovering from a serious stroke. I join him, as I am sure does the rest of the House, in wishing the hon. Gentleman a full recovery.
The hon. Member said that only 30 acres on the north foreshore have the basic services. On the north foreshore, there are only two owners—the Belfast city council and the Belfast harbour commissioners. Both will be responsible for putting in the infrastructure services which are required.

Rev. Ian Paisley: Is it not a fact that at the moment only 30 acres are available?

Mr. Mitchell: It will be some months before the order is through and there is action on the ground. Already the Belfast harbour commissioners and the Belfast city council are considering what they will do. We shall work with them.
The hon. Member regretted that the local authorities were not being involved, and complained that there was too much power for the Department of the Environment. We are proposing to have an advisory committee on which we shall ask two representatives of the Belfast city council to serve, together with representatives of the Northern Ireland CBI, the chamber of trade, the chamber of commerce, the trade unions, the local estate agents, the local enterprise development unit, and consultants. The banking fraternity will also be invited to serve.

Mr. Pendry: rose——

Mr. Mitchell: I am coming to the hon. Gentleman's remarks. I am leaving him to last. I wish there were more time to deal with his speech. He raised a number of technical points on which I shall write to him. The £¾ million will not be taken from the Northern Ireland Vote. The right hon. Member for Down, South (Mr. Powell) also asked about that. He feared that it was a gimmick.
The hon. Member for Stalybridge and Hyde claimed that the outlook for Northern Ireland was one of universal gloom. We do not claim that this experiment will resolve all Northern Ireland's problems. To talk in terms of universal gloom is unfair. There are grounds for hope in firms such as Dupont, which has announced a £45 million investment, and Michelin with £23 million for further re-equipment. Recently Tootal announced a major further investment. The hon. Gentleman claimed that the Belfast enterprise zone was nothing more than window dressing. Yet that window dressing provides exemption from development land tax. It provides for 100 per cent. capital allowances for commercial and industrial building. It provides for the 100 per cent abolition of rating, for the simplification of planning procedures, and for changes reducing the amount of intervention by Government in relation to statistical information. It provides for training


boards and great opportunities in bonded warehousing and free port facilities, as mentioned by my hon. Friend the Member for Wavertree.
To say that the enterprise zone is a gimmick is unfair. It is a genuinely interesting and imaginative experiment, designed to see whether we can pull up an area of 500 acres by its bootstraps and make it an area whose growing prosperity will brush off on to neighbouring areas. That is in addition to offering the most generous grant system in the United Kingdom of capital assistance to firms coming in and creating new jobs. It is equivalent to a regional development grant of 30 per cent. My hon. Friend the Member for Wavertree would like the assistance to go to Liverpool. We should not write off the substantial amount that the Government are investing.

Question put and agreed to.

Resolved,
That the draft Enterprise Zones (Northern Ireland) Order 1981, which was laid before this House on 3 March, be approved.

NORTHERN IRELAND (PLANNING BLIGHT COMPENSATION)

Resolved,
That the draft Planning Blight (Compensation) (Northern Ireland) Order 1981, which was laid before this House on 16 February, be approved. —[Mr. David Mitchell.]

NORTHERN IRELAND (PUBLIC ORDER)

Resolved,
That the draft Public Order (Northern Ireland) Order 1981, which was laid before this House on 13 January, be approved. —[Mr. David Mitchell.]

EUROPEAN LEGISLATION, &c.

Ordered,
That the Standing Order of 2 July 1979 relating to the nomination of the Select Committee on European Legislation, &amp;c., be amended, by leaving our Mr. Ronald Leighton and Mr. Tam Dalyell and inserting Mr. Stan Crowther and Mr. Raymond Ellis.—[Mr. Newton.]

STATUTORY INSTRUMENTS (JOINT COMMITTEE)

Ordered,
That the Standing Order of 26 June 1979 relating to the nomination of the Joint Committee on Statutory Instruments be amended, by leaving out Mr. Allen McKay and inserting Mr. Alec Woodall. —[Mr. Newton.]

Civil Servants (Political Activities)

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Newton.]

Mr. Frank Field: I am grateful to you, Mr. Deputy Speaker, for the opportunity to introduce the debate. I declare an interest. I am the parliamentary consultant to the CPSA, but even without that interest I should have introduced the subject, which is part of a fundamental debate—the maintenance of a free society.
Given the hour and the time allowed for debate, the Minister will be pleased that I am asking him not to contemplate the entire topic but to cast his gaze more narrowly on the political canvas and particularly on the two beliefs that have been important in governing the activities of civil servants—that at all time the Civil Service should remain impartial and that as a community we should offer every possible opportunity for civil servants to participate in political activity.
I wish to develop briefly the theme of how we have reinterpreted the two beliefs and their relationship to each other over the century. There has been a steady advance. We have made it easier for more civil servants to participate as ordinary citizens in political life, yet few would impugn the integrity and political neutrality of our Civil Service. I am pushing at an open door in propounding the tradition, as the Minister fully understands that aspect of that Tory tradition—namely, that the safest way to bring about change is to build, brick by brick, on a secure foundation.
I wish to show how we have changed in this century and to suggest that we may be at a stage where a new initiative is required by the Government. Before 1948, three forces governed the political behaviour of the Civil Service. First, the 1909 Treasury circular laid down the rules under which civil servants could participate in political activity at local government level. Civil servants could participate in local politics if their head of department agreed. Secondly, the 1927 order forbade most civil servants from being adopted as candidates for Parliament and remaining within the service.
The third force, which was the linchpin between those other two forces, was the strong convention within the service that at all times civil servants should maintain a reserve in respect of political activities.
Those were the forces which governed up to 1948, when the then Labour Government published the Masterman report. I hope that I do not do an injustice to the report if I say that the findings had one significant change for the political activities of civil servants. The report advocated that there should be two categories of civil servants, those who could and those who could not become involved politically, or, as it was known, those above and those below the line. Because the staff side was unhappy with this classification, the Government finally, in 1952 I think, suggested that there should be three categories of civil servants—those who were unlikely to participate in political activity as most of us know it, an intermediate category and those who would be free to participate as ordinary citizens.
It is right to say that the rulings of the Masterman report lasted for another 30 years, up to 1978 when the Armitage report was published. Given the criticisms that we have


recently had of civil servants, I ask the House to bear with me when I quote a couple of sentences from the Armitage report. In paragraph 137, Armitage says:
Over the last few years the Civil Service has been under constant scrutiny from Parliament, the press and the public. Questions have been raised about its size, its central organisation, its pay, its pensions, its career structure and its methods of recruitment. But few have challenged its capacity to serve Governments of different political views impartially.
In other words, although there have been changes over the 80-odd years of this century, no one has doubted the political impartiality of the Civil Service.
After considering the political role of civil servants, the Armitage report came up with one major suggestion for the Government, Parliament and the Civil Service to consider. That was that there should be a reallocation of civil servants within the three categories I have mentioned. The report advocated that the restricted class of civil servant should be reduced still further—down to 3 per cent. —the intermediate grade of civil servant who could participate in some political activities should be raised to 68 per cent. and the free category, those who live almost without bondage and act as ordinary citizens of the State, should rise to 29 per cent.
In my remaining minutes I want to make two points. The first is that Armitage was perhaps wrong with regard to its findings in one respect to one group of civil servants, and the second is that events have, to some extent, overtaken the report since its publication. We cannot blame the committee for that. I mention first the area where I think the Armitage committee was wrong in its suggestion. Rightly, and mindful of the way one or two civil servants behaved back in the 1960s, the committee reinforced the accepted convention of the Civil Service that civil servants who come into close and regular contact with the public should be in the intermediate grade of civil servants, whose political activities should be carefully restricted. In particular, there were included in this category the junior clerical grades within the DHSS and the Department of Employment. The first thing I want to ask the Minister is whether it was correct in allocating that group of civil servant to that category of restriction.
The second and, perhaps, more important point is that the world has changed considerably since Armitage reported. I seek to make no party point here, not even that of saying that I do not intend to make party points and then going on to make them, as some politicians do. I believe that we have entered a new political era in which Governments who put forward radical manifestos before the electorate try to carry them out. While I may disagree with the Government's policies, I have never accused them of being dishonest or deceitful to the electorate in the way in which they presented their programme to it.
Nevertheless, because the programme was so radical, there have been pressures upon many civil servants in a new way, in the sense that they feel that because the Government are changing the rules of the game and that the scope of the Government's activities is being changed, they are no longer able to give the public service that they used to be able to give and for which they entered the Civil Service.
To illustrate this changed world, I cite three examples which have arisen in public debate recently and on which I feel that the Armitage report does not give adequate guidelines to lay down the framework in which there will be an accepted programme of activity for both middle-ranking and junior civil servants.
The first concerns the right of civil servants to write to their Members of Parliament. The Minster will be aware of one case in Manchester in which a civil servant wrote to her local Member of Parliament about the loss of the vocational guidance service from the Department of Employment. Looking through the correspondence, I believe that the Government's reaction was of two kinds. The first was that it was wrong for civil servants to write in order to protect their own jobs. It is strange that the Government should say that civil servants should not have that right, as much of my time and that of hon. Members on both sides of the House is taken up by people who are fearful about the loss of their jobs. Why should not civil servants approach their Members of Parliament about the possible loss of their jobs?
Many civil servants are also concerned about the loss of service to the public through the loss of their jobs. We all live in a post-Freudian world in which it is very difficult to know our own motives clearly. I imagine that all of us have a mixture of motives. We hope to put the motives of high principle first, but it does not always work out like that, and civil servants will be concerned about the service they provide and any loss of jobs and will write to their Members of Parliament about this.
Secondly, there is the right of civil servants to participate in their own political parties. In a recent case, an official from the Department of Employment attended the Conservative Party conference. It is clear from the correspondence that she intended to speak on the subject of pensions if it arose during the conference. She was so stung by the comments about civil servants during the conference, however, that at one point—I think that it was during the debate on Tory Party organization—she got up and spoke her mind to the conference on the subject. That was an understandable reaction. The correspondence with her superiors on the matter, like all of the correspondence that I have read, illustrates the honesty and integrity of civil servants. None has tried to hide one iota of his or her actions.
A third area of difficulty is when individual members of a union are asked to appear on the media as trade union branch officials and to comment on how Government policy may be affecting the service and the livelihood of their members.
It seems to me that in all three examples we do not yet have clear rules by which to govern the conduct of civil servants. We need those rules, for the simple reason that I outlined earlier. We have entered a new political age. I do not see that age coming to an end in the foreseeable future.
I hope that we shall have clarification of the rules in the near future. When thinking about that clarification, I hope that we are mindful of the advantages as well as the real disadvantages of some civil servants taking a more overt political stance. I hope that we shall also be mindful of how this could be a strengthening of our system of democracy.
I summarise my argument by posing two questions. I know that the Administration is in consultation with the staff side on the Armitage report. When will the Minister be able to make a statement about the Government's reaction to that important report? Secondly, does he accept my contention that to some extent the world in which we now live has changed significantly from the world surveyed by Armitage in 1978? Therefore, the way in


which to respond to the Armitage suggestions may be to develop on its foundations rather than to enact a policy of retrenchment.

The Minister of State, Civil Service Department (Mr. Barney Hayhoe): I congratulate the hon. Member for Birkenhead (Mr. Field) on raising an extremely important subject with which I have had some personal experience.
I became a civil servant in 1944, in what one might call the "pre-Masterman" days. At that time I held a fairly junior grade in the Ministry of Supply, where there was some doubt as to the precise political activities in which one could be involved. I managed within the rules, and certainly with the knowledge of my superiors, to become a national vice-chairman of the Young Conservatives. Then Masterman hit the scene. When the Masterman report appeared, there was a period of dullness and greyness. About 25 years ago, I managed to speak at a Conservative Party conference. I was not disciplined—I am not even sure that I was noticed—for what I said. I sometimes wonder about my fate had I been disciplined and not allowed to be involved in politics. I wonder whether I would have ended up in the House or had much more influence in some other position within the government machine.
It may be best if I give the general basis of the rules which govern the conduct of civil servants generally as they affect policy matters and specifically as they involve party political matters. I begin from the basic proposition that the exposition of Government policies and decisions must be, and is, the responsibility of Ministers. Ministers are responsible and answerable to Parliament.
There are occasions when civil servants can help to improve the understanding of the way in which government works. Indeed, those who watch "Yes Minister" may well think that only the Sir Humphreys of this world actually know how it works.
The factual and technical background to Government policies and decisions can be provided by civil servants. There are occasions when they can, and should, contribute on the basis of their specialised information and experience obtained in the course of their official duties.
I am sure that it is widely accepted that such participation in public discussion must not prejudice national security, create the possibility of embarrassment to the Government in the conduct of their policies or bring into question the impartiality of the Civil Service.
I was delighted that the hon. Member quoted from the Armitage report in underlining the importance of the impartiality of the Civil Service and the way that, despite stresses and strains, no real criticism has been directed to it.
It is quite normal for civil servants to be given permission to use official information in outside activities, broadcasts, speeches and contacts with the press, and they are subject to various principles. There must be no disclosure of classified or "in confidence" information. There should be no discussion of matters of current or potential political controversy. Relations between civil servants and Ministers and the confidential advice given to Ministers should not be disclosed. There should be no comment on individuals or organisations in terms which

the Department would regard as objectionable. The activities should not conflict with the interests of the Department or bring the good name of the Department or the Civil Service generally into disrepute.
That is the general framework and background of the code of conduct that applies. The hon. Member directed most of his remarks to the political activities of civil servants. The extent to which civil servants may become involved in national or local political activities depends on a number of factors, as he said—the extent to which the individual is involved in advising Ministers and carrying out Ministers' policies and the degree and nature of the individual's contact with the public in pursuit of his official duties.
Of considerable importance and one of the matters to which the hon. Gentleman referred was the question—though I do not know it in detail—of Department of Health and Social Security personnel having normal steady contact with the public in their vicinity and the fact that Armitage suggests and recommends that their activities be restricted. My judgment is that one must be particularly careful that a member of the public is not, for example, canvassed on one night by someone asking for support for a political party and the following day confronted by the same person in an official capacity at a DHSS office. That problem is associated not so much with the grade or seniority of the person as with his closeness to the public with whom he might come in contact in his political activities.
The third condition was the extent to which the political activities of the individual are likely to become known. In the case of my own experience, I was involved in a highly technical Department. I did not come in contact with the public in any of my official duties and I was not ever involved as an official in any of the matters which I spoke about in public. Although I also took part in political activities, there was a great separation, and that sustained me that I was not behaving in any way improperly in my political activity.
Generally, industrial staff are free to involve themselves in both national and local activities. More junior office staff—typists, clerks and so on—are free to engage in both, subject to conditional permission from their Departments. Staff in the executive and more senior grades are, as the rules now stand, debarred from national political activities, including expressing views on any matters of national political controversy, but may—dependent upon individual circumstances—be granted permission to take part in local political activity.
The present rules were recently considered by the Armitage Committee, as the hon. Gentleman said. The Committee endorsed the basic framework of the present rules but concluded that the expansion of the Civil Service over the past 25 years and the wider variety of work now undertaken by staff in any one grade pointed to some liberalisation of the rules without detriment to the impartial reputation of the service.
The Armitage committee was established in 1976 and reported in January 1978. The Labour Government put detailed proposals to the Civil Service unions a year later, in January 1979. There was then an election and a change of Administration. Those discussions were picked up—very much in the same vein—with the Civil Service trade unions in December 1979. In those discussions, it was perfectly clear that the trade unions supported the Armitage report and the additions to the majority report


that were made by the minority of Barbara Castle and Stanley Mayne. I shall not go into the details, but there were four specific points on which the minority reported.
The latest development on Armitage is that at the end of last month a letter was sent from my Department to the secretary-general of the Council of Civil Service Unions which took this matter one stage further. It said that Ministers had authorised Civil Service Department officials to proceed with further consultations with a view to implementing the recommendations of the Armitage committee. The letter continued:
At the December 1979 meeting the Trade Union Side expressed support for the minority views of the Armitage Committee"——
that is the point that I have sought to make. It continued:
namely a lifting of the bar on canvassing, the keeping under review of the composition of the politically free group, the possibility of the adjudication body being chaired by a Privy Councillor, and a relaxation of the rules on parliamentary candidature. Ministers"——
this is the important point——
have considered these minority views but have decided that they are prepared to proceed with implementation of Armitage only on the basis of the acceptance of the majority recommendations in toto. They do not agree that there should be any relaxation in the rules on political activities other than that recommended by Armitage in relation to the proposed extended intermediate category".
One should stress that that is a substantial liberalisation of the regime for many civil servants.
The hon. Gentleman raised two specific points, one of which referred to the restrictions on DHSS junior grades. I tried to respond to that. He then spoke of the new pressures on the Civil Service. He wondered whether it was right to keep the rules as they are. He referred to Meg MacDonald, who spoke at the Conservative Party conference and was reprimanded by her Department for doing so. This was a matter for the Department of Employment. Specific questions should be addressed to that Department. However, it judged that she had broken the rules.
The question of letters to Members of Parliament was raised. We must be careful about imposing restrictions in

any way on the rights of individual constituents to contact their Members of Parliament. Obviously, they must Oct use the special knowledge that they obtain by reason of their job to pursue that contact. This has nothing to do with the political activities mentioned in Armitage. It falls within the general code of conduct.
The question of media requests is sometimes linked with trade union activity. The Armitage committee considered the rules on political activity in relation to staff acting in their capacity as staff association members when engaged in legitimate union business, on which a relaxed attitude has been, and continues to be taken. It commented that it is a long-standing tradition that trade unions may deploy any argument that is relevant to the legitimate interests of their members. It is inescapable that occasions will arise in the public service when unions and their members will criticise the policy of their employer, who is the Government of the day.
The committee considered that the public at large generally understood the distinction between criticisms of that nature, which arise out of legitimage trade union activity, and opposition to the Government that arises in the course of party political activity. No additional guidance was thought necessary in that respect. The existing rules are necessary to maintain the political impartiality of the Civil Service and the relationship between the Government and the Civil Service.
Relaxations are being made as a result of the Armitage report. It will always be claimed that not enough is being done. I refer to the speech that I made at the patty conference. Harold Macmillan replied and quoted— I think—from Disraeli. He said that people always said that it came too late. In fact, it was something that it came at all.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twelve o'clock midnight.